ATO Interpretative Decision

ATO ID 2003/55

Goods and Services Tax

• 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 The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts.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 non-resident overseas company, making a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies an inbound money transfer service (from overseas to Australia) to a customer overseas?

Decision

No, the entity is not making a taxable supply under section 9-5 of the GST Act, when it supplies an inbound money transfer service to a customer overseas. The supply of the inbound money transfer service is outside the scope of the Australian goods and services tax (GST) system.

Facts

The entity is a non-resident overseas 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 inbound money transfer service (from overseas to Australia) to an overseas customer. This supply involves these steps:

•

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

•

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

•

The customer's nominee in Australia contacts the entity's Australian agent and collects the money from that agent after completing a money receipt form. The entity's obligation to the customer overseas 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 supply is in the course or furtherance of the entity's overseas enterprise. In this instance the supply is made through the non-resident agent and not made through an enterprise carried on in Australia. The entity is registered for GST.

Reasons for Decision

Section 9-5 of the GST Act sets out the requirements that must be satisfied for a supply to be a taxable supply. One of those requirements is that the supply must be connected with Australia (paragraph 9-5(c) of the GST Act).

Section 9-25 of the GST Act defines when a supply is 'connected with Australia'. For the purposes of determining whether a supply is connected with Australia, section 9-25 makes a distinction between a supply of goods, a supply of real property and a supply of anything other than goods or real property.

The entity is not making a supply of goods or real property. The entity is supplying an inbound money transfer service to a customer overseas. In making this supply, the entity is providing the customer with a presently existing obligation to pay an ascertainable amount at a future time. Therefore, the supply that the entity makes is a supply of something other than goods or real property and, as such, subsection 9-25(5) of the GST Act is the appropriate provision to determine whether the supply is connected with Australia.

Subsection 9-25(5) of the GST Act 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; or

(c)

all of the following apply:

(i)

neither paragraph (a) nor (b) applies in respect of the thing;

(ii)

the thing is a right or option to acquire another thing;

(iii)

the supply of the other thing would be connected with 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 the overseas customer 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 agent is done overseas and not in Australia. Therefore, the supply of the obligation to the customer is not done in Australia and the supply is not connected with Australia under paragraph 9-25(5)(a) of the GST Act.

As the supply in this case is is made through the non-resident agent and not through an enterprise carried on in Australia, the supply is not connected with Australia under paragraph 9-25(5)(b) of the GST Act.

Paragraph 9-25(5)(c) of the GST Act may apply where neither paragraph 9-25(5)(a) nor paragraph 9-25(5)(b) of the GST Act apply. For paragraph 9-25(5)(c) to apply, the thing supplied must be a right or option to acquire another thing, where the supply of the other thing would be connected with Australia. In this case, the thing supplied was not a right or option, it was the entry into a presently existing obligation (to an overseas customer) to pay an ascertainable amount at a future time. The subsequent payment of this amount to the customer's nominee in Australia simply discharges the obligation to the customer. As such, the supply is not connected with Australia under paragraph 9-25(5)(c).

As the supply is not connected with Australia, the requirements of paragraph 9-5(c) of the GST Act are not satisfied. Accordingly, the entity is not making a taxable supply under section 9-5 of the GST Act when it supplies an inbound money transfer service to a customer overseas. The supply of the inbound money transfer service is outside the scope of the Australian GST system.

Legislative References:
A New Tax System (Goods and Services Tax) Act 1999
   section 9-5
   paragraph 9-5(c)
   section 9-25
   subsection 9-25(5)
   paragraph 9-25(5)(a)
   paragraph 9-25(5)(b)
   Paragraph 9-25(5)(c)
   subparagraph 9-25(5)(c)(i)
   subparagraph 9-25(5)(c)(ii)
   subparagraph 9-25(5)(c)(iii)

Related Public Rulings (including Determinations)
GSTR 2000/31

Keywords
Goods and services tax
Connected with Australia

Siebel/TDMS Reference Number:  265796-A

Business Line:  Indirect Tax

Date of publication:  15 March 2003

ISSN: 1445-2782