ATO Interpretative Decision

ATO ID 2003/115 (Withdrawn)

Goods and Services Tax

• The ATO view for this issue is covered in Goods and Services Tax Ruling GSTR 2002/2 and ATO ID 2003/56.
  This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

Issue

Is the entity, an overseas non-resident company, making an input taxed supply under subsection 40-5(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies an intra-money transfer service (within Australia) to a customer in Australia?

Decision

Yes, the entity is making an input taxed supply under subsection 40-5(1) of the GST Act, when it supplies an intra-money transfer service to a customer in Australia.

Facts

The entity is an overseas non-resident company. The entity provides an international money transfer service to customers located worldwide, via its agents that are located in various countries (including Australia).

In this case, the entity is supplying an intra-money transfer service to a customer in Australia. This supply involves these steps:

•

The customer in Australia initiates a money transfer by contacting the entity's agent in Australia to transfer money to the customer's nominee within Australia.

•

The customer in Australia provides the entity's Australian agent with a money transfer form together with an amount of the money which is to be transferred to the entity's agent at another location in Australia (receiving agent). The entity recognises a liability in its financial accounts when the money is provided to its agent.

•

The customer's nominee contacts the entity's receiving agent and collects the money from this agent after completing a money transfer form to receive money. The entity's obligation to the customer in Australia is discharged when this payment is made and the payment is recorded as a subsequent reduction of the liability in the entity's financial account.

•

The customer in Australia pays a fee to the entity's Australian agent for the money transfer.

The entity is registered for goods and services tax (GST). The supply of the intra-money transfer service is in the course or further of an enterprise that the entity carries.

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:

•

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

•

is for consideration;

•

is in the course or furtherance of an enterprise;

•

is connected with Australia; and

•

(paragraph 40-5.09(1)(a) of the GST Regulations).

the supplier:

•

is registered or required to be registered for GST;

•

is a financial supply provider in relation to a supply of the interest; and

•

(paragraph 40-5.09(1)(b) of the GST Regulations).

However the supply of something, or an interest in or under something, that is also covered by regulation 40-5.12 is not a financial supply.

First, it is necessary to determine whether there is a supply by the entity to the customer in Australia, of an interest in or under an item mentioned in subregulation 40-5.09(3) or (4) of the GST Regulations.

In supplying the intra-money transfer service, the entity is providing the customer with a presently existing obligation to pay an ascertainable amount at a future time. The supply of this obligation is a provision of an interest in a debt and is covered by item 2 in the table in subregulation 40-5.09(3) of the GST Regulations.

The provision of an interest in a debt is not listed as an item in regulation 40-5.12 of the GST Regulations. Therefore, the provision of this interest is a financial supply if all the requirements of subregulation 40-5.09(1) of the GST Regulations have been satisfied.

The customer in Australia pays a fee to the entity's Australian agent for the money transfer. Therefore, the supply (provision of the interest in a debt) is for consideration.

The provision of the interest in a debt is not a supply of goods or real property. Therefore, subsection 9-25(5) of the GST Act is the appropriate provision in determining whether the supply is connected with Australia.

Subsection 9-25(5) provides that a supply of anything other than goods or real property is connected with Australia if either:

(a)

the thing is done in Australia; or

(b)

the supplier makes the supply through an enterprise that the supplier carries on in Australia.

For the purposes of paragraph 9-25(5)(a) of the GST Act, paragraph 209 of Goods and Service Tax Ruling GSTR 2000/31 provides:

'if the supply is the obligation to do anything or the obligation to refrain from an act or the obligation to tolerate an act or situation, the thing that is being supplied is the obligation to do something, or to tolerate something, and the thing is done where that obligation is entered into.'

In this circumstance the obligation arises under an agreement which was executed when that customer provides the entity's Australian agent with a completed a money transfer form. The completion of the money transfer form by the customer and the acceptance of the completed form and money by the entity's Australian agent is done in Australia. Therefore, the supply of the obligation to the customer is done in Australia and the supply is connected with Australia under paragraph 9-25(5)(a) of the GST Act.

The supplier is registered for GST and the supply is in the course and furtherance of an enterprise. Therefore, the first four requirements in subregulation 40-5.09(1) of the GST Regulations are satisfied. Accordingly, it is necessary to determine whether the entity is a 'financial supply provider' in relation to the provision of the interest.

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

•

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

•

created the interest in making the supply.

The entity created the interest in a debt in making the supply (provision of a presently existing obligation to pay an ascertainable amount at a future time). Therefore, the entity is the financial supply provider in relation to the provision of the interest in a debt to the customer in Australia.

The supply of the intra-money transfer service by the entity (through its Australian agent) to its customer in Australia satisfies all the requirements for a financial supply as defined in regulation 40-5.09 of the GST Regulations. Therefore, the entity is making an input taxed supply under subsection 40-5(1) of the GST Act, when it supplies an intra-money transfer service to a customer in Australia.

Legislative References:
A New Tax System (Goods and Services Tax) Act 1999
   subsection 9-25(5)
   paragraph 9-25(5)(a)
   subsection 40-5(1)

Related Public Rulings (including Determinations)
GSTR 2000/31
GSTR 2002/2

Keywords
Goods and services tax
Input taxed supplies
GST financial supplies
GST debt, loan and credit

Business Line:  GST

Date of publication:  15 March 2003

ISSN: 1445-2782