Explanatory StatementIssued by authority of the Assistant Treasurer
Subject - Section 177-15 of the A New Tax System (Goods and Services Tax) Act 1999
Section 177-15 of the A New Tax System (Goods and Services Tax) Act 1999 (the Act) provides that the Governor-General may make regulations prescribing matters required or permitted by the Act to be prescribed, or necessary or convenient to be prescribed for carrying out or giving effect to the Act.
Section 40-5 of the Act specifies that 'financial supply' has the meaning given by the regulations.
The purpose of the amending Regulations is to amend the A New Tax System (Goods and Services Tax) Regulations 1999 (the Principal Regulations) to define the supply of certain automatic teller machine (ATM) services as a 'financial supply'. This ensures that no GST is charged on those ATM transactions.
Under section 40-5, financial supplies are generally input taxed. As a result of sections 9-5, 11-5 and 11-15 of the Act, suppliers incur no GST liability on input taxed supplies, but no input tax credits are available to the supplier for any related acquisitions.
Prior to 3 March 2009, consumers were only charged indirectly for ATM services, through increased bank account charges. However, the Reserve Bank of Australia has introduced rules permitting ATM providers to charge users directly when they make use of the providers' ATMs from this date. It is expected that individuals using ATMs not operated by their account provider will be charged.
Without the amending Regulations, the GST treatment of supplies of ATM services for which users were directly charged would have differed depending on whether or not the ATM provider was an Authorised Deposit-taking Institution (ADI). If the ATM provider was an ADI, such as a bank or credit union, and the service was provided as part of the supply of a bank account to their own customer, the supply would an input taxed financial supply as the supply of an interest in or under a bank account (sub-regulation 40-5.09(3) of the Principal Regulations).
Similarly, if the ATM provider was an ADI, but the service was not provided in relation to an account with that ADI, the supply would still be input taxed as sub-regulation 40-5.09(4) of the Principal Regulations provides, amongst other things, that supplies by an ADI (for consideration of less than $1000) that would have been financial supplies if supplied in relation to an account with the ADI are financial supplies.
However, if the ATM provider was not an ADI, for example a business whose sole activity was providing and maintaining ATMs, neither sub-regulation could apply and the supply would have been taxable.
The amending Regulations addressed this anomaly by inserting new sub-regulation 40-5.09(4A) into the Principal Regulations, making supplies of specified ATM services for consideration of not more than $1000 input taxed financial supplies. This ensures that supplies of ATM services made by non-ADIs receive the same GST treatment that already applies to supplies made by ADIs.
Public consultation was undertaken on the design and drafting of the Regulations.
The compliance costs associated with this amendment were assessed and determined to be minimal. The Office of Best Practice Regulation agreed with this assessment and determined that a regulatory impact statement was not required.
The Regulations are a legislative instrument for the purposes of the Legislative Instruments Act 2003.
The Regulations commenced on 3 March 2009.