Major Victorian energy supplier fails $1.4m adjustment claim against nearly $20m in penalties

A Victorian electricity distributor has failed its appeal against the Commissioner of Taxation’s deemed assessments of GST net amount set out in each business activity statement lodged in the period 1 March 2019 to 31 December 2020, and has been ordered to pay the Commissioner for costs of the appeal.

The distributor, AusNet Services, claimed that due to decreasing adjustments, it was eligible for a $1.4 million adjustment against the $16 million in guaranteed service level (GSL) payments that it made to customers during this period for failing to meet the guaranteed service level.

The Federal Court’s Justice Mark Moshinsky has dismissed the appeal on the basis that the distributor was directly involved with the provision of services, and thus, this did not give rise to an “adjustment event”, in the event that it was indirectly involved with customers through a middleman.

The Victorian energy supplier, AusNet Services and its subsidiaries, own and operate the electricity transmission network and one of the five electricity distribution networks.

AusNet was head of a GST group that included an electricity distributor, AusNet Electricity Services (AES), which provides distribution services to about 840,000 customers in eastern and north-eastern Victoria.

AusNet submitted this appeal on behalf of AES.

GSL Payments

AES provided basic connection services associated with a new connection or alteration of an existing connection to a customer’s premises and services associated with the ongoing supply and distribution of electricity.

Further, AES provided the design and installation of the connection assets and the installation of metering equipment.

Charlotte Eddy, the general manager – strategy and regulation (distribution) at AusNet, said in her evidence that AES is required to pay a customer if they do not meet agreed deadlines for the works and if the “customer exceeds certain thresholds for unplanned outages or interruptions to that supply of electricity to the customer” in line with GSL payment rules.

Based on the Essential Services Commission (the ESC) Review of the Victorian Electricity Distributors’ Guaranteed Service Level Payment Scheme in December 2015, the court noted that the purpose of GSLs was to acknowledge the inconvenience caused by a distributor who does not meet minimum service standards and to incentivise the distributor to improve its reliability.

The GSL scheme has six categories of reasons for payments: low reliability, “supply restoration”, “supply restoration – single interruption”, “late or missed appointments”, and “delayed new connections”.

“GSL Payments were only made for supply issues if the outage/interruption was unplanned. The quantum of the relevant GSL Payment turned upon the terms and threshold of the service standard not met by AES,” the court said.

The court noted that a retailer was involved with the flow of funds between the customer and AES, namely Momentum Energy, including for GSL payments.

“AES did not bill end-users directly for the provision and use of AES’s services related to the supply of electricity and basic connection fee-based services,” the court said.

The court noted that thus, the processing of GSL Payments incurs a fee to the retailer for the “retail service”.

Was AES a direct or indirect supplier

In its appeal, AusNet put forward an indirect supply analysis to support its $1.4 million decreasing adjustment claim on the GSL.

Despite AES’s use of Momentum Energy as a retailer, the court determined that this did not constitute an adjustment event which changes the consideration for the supply of the energy services.

In her evidence, Eddy said: “Practically and commercially, AusNet views those payments as payments made by the customer for services provided by AusNet.”

“In practice we treat the end-user customer as the recipient of the services,” she said.

The court said that Eddy’s evidence contained words that “tend to support the direct supply analysis” provided by the Commissioner.

The direct supply analysis provides that AES provides the services “directly to customers (with billing and payment being done through the retailer)”, and indirect where AES “supplied the Relevant Services to the retailer and the retailer supplied those services to the customer”, the court found.

Thus, the court determined that AES provided the “relevant services” directly to the customers.

“For these reasons, I consider the Direct Supply Analysis to be correct (and the Indirect Supply Analysis to be incorrect),” the court said.

“In my opinion, the better view is that the GSL Payments were standalone amounts which AES was required to pay to the customer and were not amounts which had the effect of changing the consideration paid or payable by the customer to AES for the supply of the Connection Services or the Supply Services,” the court said.

“Putting this another way, the GSL Payments were not an integer in the consideration for the supply of the Connection Services or the Supply Services,” it added.

Upon consideration of all evidence, Justice Moshinsky ruled that the GSL payments did not constitute an adjustment event on the basis of the direct supply analysis, dismissing the appeal and ruling that costs should follow.

The case citation: AusNet Services Limited v Commissioner of Taxation [2026] FCA 1609.