Issue 17 – Foreign exchange dealings and travellers cheques

Some operators in the tourism industry (such as hotels) provide a foreign currency exchange service. The operator may be acting in their own right or may be acting on behalf of an exchange bureau.

Issue

Is the service of exchanging foreign currency or travellers' cheques input taxed?

This issue is a public ruling for the purposes of section 105-60 of schedule 1 to the Taxation Administration Act 1953.

Decision

A foreign currency transaction is a financial supply under item 9 of sub-section 40-5.09(3) of the A New Tax System (Goods and Services Tax) Regulations 2019 (GST Regulations). Some examples are traveller's cheques and foreign currency in cash form or drafts. Financial supplies are input taxed under Div 40.

GST does not apply to dealing in foreign currency and travellers' cheques itself as it is input taxed.

The GST implications for the fee or commission charged on travellers' cheques and foreign currency transactions will depend on whether you are acting as a principal or an agent as follows:

As a principal

No GST is payable on the commission or fee when you buy or sell travellers' cheques or foreign currency and you are acting in your own right, and not as an agent of someone else. This is because you are a financial supply provider and have a direct interest in the financial supply.

As an agent

If you buy or sell travellers' cheques or exchange foreign currency on behalf of someone else, and are acting as an agent, GST is payable on the fee or commission you receive for those agency services. This is because you are a financial supply facilitator and are making a taxable supply.

References

Item 9 of sub section 40-5.09(3) of the GST Regulations.

Financial services - questions and answers  

5. Foreign currency, foreign exchange rates and travellers' cheques

GSTR 2002/4 - Goods and services tax: recipient created tax invoices and foreign currency conversions

GSTR 2002/2 - Goods and services tax: GST treatment of financial supplies and related supplies and acquisitions

GSTR 2001/2 - Goods and services tax: foreign exchange conversions

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