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Edited version of private ruling

Authorisation Number: 1011649720682

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Ruling

Subject: GST and financial supplies

Question 1

Is the service (for which a fee is payable) to facilitate the process of telegraphic money transfer a taxable supply?

Answer

A service (for which a fee is payable) to facilitate the process of telegraphic money transfer, is a taxable supply and subject to GST.

Question 2

Are you entitled to claim full input tax credits for the acquisitions relating to these supplies?

Answer

Yes, you are entitled to claim full input tax credits for the acquisitions relating to these supplies.

Facts

You are running a money transfer business and are registered for goods and services tax.

You operate as an agent for an international entity.

The international entity pays a fee to you for international money transfers and foreign exchange margins sourced from sub agents in Australia.

Sub agents provide a service where a customer might need to send money overseas using the international entity.

The sub agents sight and verify the ID of the customers and execute the transfers.

You receive a commission from the international entity

You pay commissions to the sub agents for rendering the services.

The sub agent is acting like a franchisee for you who in turn are acting like a franchisee to International entity.

Question 1

What supplies are financial supplies?

Financial supplies, are input taxed by virtue of subsection 40-5(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act). 

Regulation 40-5.09 of the GST Regulations establishes that the provision, acquisition or disposal of an interest in Australian currency or foreign currency is a financial supply, if, amongst other things, it is supplied for consideration and provided by a "financial supply provider".

Who are financial supply providers?

With respect to the term "financial supply provider", regulation 40-5.06 defines the term as:

In addition, regulation 40-5.02 defines the term "interest" as relating to:

With regard to the facts at hand, you are not a "financial supply provider" in relation to the supply of an interest (property) in money. This is because you are only facilitating the supply of money and the money does not become your property at any time.

Who are financial supply facilitators?

Since you are not a "financial supply provider" in respect of money, the service provided by you to facilitate the transfer of money is not a financial supply. The term 'financial supply facilitator' is defined in regulation 40-5.07 as follows:

Section 7-1 of the GST Act provides, amongst other things, that GST is payable on "taxable supplies".

Section 9-5 of the GST Act mentions that you make a taxable supply if you make the supply for consideration, the supply is made in the course or furtherance of an enterprise that you carry on, the supply is connected with Australia and you are registered or required to be registered.

However, the supply is not a taxable supply to the extent that it is GST-free or input taxed.'

On this basis, the supply of services by you to a customer (to which a fee is payable) so as to facilitate the supply of money is a taxable supply for the purposes of section 9-5 of the GST Act.

Question 2

You asked to clarify if you were entitled to full Input tax credits on acquisitions made to provide those supplies.

An entity makes a creditable acquisition under section 11-5 of the GST Act if:

Furthermore, an entity acquires a thing for a creditable purpose under section 11-15 of the GST Act, to the extent that it acquires it in carrying on its enterprise.

However, an entity does not acquire the thing for a creditable purpose to the extent that the acquisition relates to making supplies that would be 'input taxed' or the acquisition is of a private or domestic nature.

As established in question 1, you are not making financial supplies under the GST Regulations. You are registered for GST and we have determined that your supplies of facilitation services are taxable. Therefore, you are entitled to claim full input tax credits for the acquisitions relating to the provision of facilitation services.


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