ATO Interpretative Decision

ATO ID 2002/163

Goods and Services Tax

• This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

Issue

Is the entity, an Australian authorised deposit-taking institution (ADI), making a financial supply that is input taxed under subsection 40-5(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it opens and operates an account for a customer?

Decision

Yes, the entity is making a financial supply that is input taxed under subsection 40-5(1) of the GST Act when it opens and operates an account for a customer.

Facts

The entity is an ADI. The entity supplies an interest in an account to an Australian customer in the course of its banking business within the meaning of the Banking Act 1959. The entity also provides deposit, withdrawal and transfer services to its customer. The entity charges an account keeping fee for this supply.

The entity is registered for goods and services tax (GST).

Reasons for Decision

Under subsection 40-5(1) of the GST Act, a financial supply is input taxed. The term 'financial supply' is defined in the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations).

Subregulation 40-5.09(1) of the GST Regulations provides that the provision, acquisition or disposal of an interest is a financial supply if:

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the interest is listed in subregulation 40-5.09(3) or (4) of the GST Regulations;

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is for consideration;

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is in the course or furtherance of an enterprise;

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is connected with Australia (paragraph 40-5.09(1)(a) of the GST Regulations); and

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the supplier:

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is registered or required to be registered for GST; and

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is a financial supply provider in relation to a supply of the interest (paragraph 40-5.09(1)(b) of the GST Regulations).

Item 1 in the table in subregulation 40-5.09(3) of the GST Regulations (Item 1) lists accounts made available by an Australian ADI in the course of:

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its banking business within the meaning of the Banking Act 1959; or

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its State banking business.

Schedule 7 to the GST Regulations provides examples of financial supplies. Item 1 in the table in Part 1 of Schedule 7 to the GST Regulations states that the opening, keeping, operating, maintaining and closing of cheque, debit card, deposit and savings accounts for account holders is a financial supply.

The entity is opening and operating an account for a customer. This takes place in the course of the entity's banking business (within the meaning of the Banking Act 1959). These activities are covered by the example in item 1 in the table in Part 1 of Schedule 7 to the GST Regulations and are considered part of making the account available to the customer. Therefore, the entity is providing an interest that is covered by Item 1. Furthermore, the entity receives an account keeping fee for providing this interest and the entity does so in the course or furtherance of its enterprise in Australia. Therefore, all of the requirements in paragraph 40-5.09(1)(a) of the GST Regulations are satisfied.

Paragraph 40-5.09(1)(b) of the GST Regulations provides that the supplier of the financial supply must be registered or required to be registered for GST; and must also be a 'financial supply provider' in relation to a supply of the interest.

In this situation, as the entity (the supplier of the financial supply) is registered for GST, it must be determined whether the entity is a 'financial supply provider' in relation to a supply of the interest.

Under subregulation 40-5.06(1) of the GST Regulations, the financial supply provider of an interest is the entity that:

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had property in the interest immediately before it was supplied; or

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created the interest in making the supply.

As the entity created the interest when it supplied the account and the account keeping services to its customer, it is the financial supply provider of the interest as per the definition in paragraph 40-5.06(1)(b) of the GST Regulations. Accordingly, the requirements in paragraph 40-5.09(1)(b) of the GST Regulations are also satisfied.

As all of the requirements in subregulation 40-5.09(1) of the GST Act are satisfied, the entity is making a financial supply when it provides an account and account keeping services to its customer. This is an input taxed supply as per subsection 40-5(1) of the GST Act.

Legislative References:
A New Tax System (Goods and Services Tax) Act 1999
   subsection 40-5(1)

Other References:
Questions and Answers - Banking and Finance

Keywords
Goods & services tax
Input taxed supplies
GST financial supplies
Accounts

Business Line:  GST

Date of publication:  22 February 2002

ISSN: 1445-2782