ATO Interpretative Decision

ATO ID 2002/907

Goods and Services Tax

• This ATO ID contains references to provisions of the A New Tax System (Goods and Services Tax) Regulations 1999, which have been replaced by the A New Tax System (Goods and Services Tax) Regulations 2019. This ATO ID continues to apply in relation to the remade Regulations.

  A comparison table which provides the replacement provisions in the A New Tax System (Goods and Services Tax) Regulations 2019 for regulations which are referenced in this ATO ID is available.

  With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act.

Issue

Is the entity, a taxi network company, 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 provides a credit facility to its customers and levies a surcharge for that facility?

Decision

Yes, the entity is making a financial supply that is input taxed under subsection 40-5(1) of the GST Act when it provides a credit facility to its customers and levies a surcharge for that facility.

Facts

The entity is a taxi network company in Australia that provides network services to the owners of taxi-cabs who are affiliated with it. The entity also provides a credit facility to customers who hire taxis on account (account holders). The account holders sign account vouchers whenever they use a taxi. The entity collects the vouchers from the taxi-cab owners/drivers who are required to lodge the vouchers by a specified day of the month for payment by the entity, on a specified day of the month. In some cases the entity will immediately pay out the face value of the voucher upon its lodgement, or will credit the amount of the voucher against network fees owed to it by the taxi-cab owner. Upon receipt of the voucher, the entity adds a surcharge, calculated on the value of the taxi service, and charges the account holders the total amount.

The entity is registered for goods and services tax (GST). The supply is in the course or furtherance of the entity's enterprise.

Reasons for Decision

Under subsection 40-5(1) of the GST Act, a financial supply is input taxed. Subsection 40-5(2) of the GST Act provides that a financial supply has the meaning given by 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 mentioned in subregulation (3) or (4) is a financial supply if:

•

the provision, acquisition or disposal is:

-

for consideration;

-

in the course or furtherance of an enterprise;

-

connected with Australia; and

•

the supplier is:

-

registered or required to be registered for GST; and

-

a financial supply provider in relation to the supply of the interest.

Firstly, it is necessary to determine whether the entity is providing, acquiring or disposing of an interest in or under an item mentioned in subregulation 40-5.09(3) or (4) of the GST Regulations.

'Interests' are mentioned in the table in subregulation 40-5.09(3) of the GST Regulations and Item 2 in the table (Item 2) lists 'a debt, credit arrangement or right to credit, including a letter of credit'. As the entity provides a credit facility, it is providing an interest under a credit arrangement and the surcharge that it levies represents consideration for this interest.

The entity's supply of the interest is in the course or furtherance of the enterprise that it carries on in Australia, the entity is registered for GST and charges a surcharge to its customers for the provision of the credit facility which amounts to consideration.

The final requirement is that the supplier is a financial supply provider in relation to the supply of the interest. 'Financial supply provider' is defined in subregulation 40-5.06(1) of the GST Regulations:

'An entity, in relation to the supply of an interest that was:

(a)

immediately before the supply, the property of the entity; or

(b)

created by the entity in making the supply;

is the financial supply provider of the interest.'

As the interest (the credit arrangement) was created by the entity in making the supply, the entity is a financial supply provider in relation to that interest.

Therefore, all the requirements of subregulation 40-5.09(1) of the GST Regulations are satisfied. As such, the entity is making a financial supply that is input taxed under subsection 40-5(1) of the GST Act when it provides a credit facility to its customers and levies a surcharge for that facility.

Legislative References:
A New Tax System (Goods and Services Tax) Act 1999
   subsection 40-5(1)
   subsection 40-5(2)

Keywords
Goods & services tax
Input taxed supplies
GST financial supplies

Siebel/TDMS Reference Number:  CW252898

Business Line:  Indirect Tax

Date of publication:  16 September 2002

ISSN: 1445-2782