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Ruling

Subject: GST and the acquisition and supply of gold and silver coins

Questions:

1. Is your supply of gold and silver coins subject to goods and services tax (GST)?

2. Are you entitled to claim an input tax credit in accordance with Division 66 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) on your acquisition of the gold and silver coins from a private supplier(s)?

Answers:

1. Your supply of the silver coins that are classified as precious metals is an input taxed supply, or alternatively the supply of these coins is GST-free if you export them outside Australia within the required period. Accordingly, the supply is not subject to GST in this circumstance.

Your supply of the gold coins and other silver coins that are not classified as precious metals is a taxable supply. However, if you export these gold and silver coins outside Australia within the required period, the supply of these coins is GST-free.

2. No, you are not entitled to claim an input tax credit in accordance with Division 66 of the GST Act to the extent that the coins consist of gold (or silver or platinum).

Relevant facts and circumstances

You are registered for goods and services tax (GST).

You purchase various gold and silver coins from private suppliers, through auctions and from private sellers. You sell the coins mostly to private collectors.

The gold coins do not have a fineness of 99.5% or more. Some of the silver coins have a fineness of 99.9%.

You have never tried trading the coins on the international bullion market(s). Not all the coins bear marks identifying and guaranteeing their fineness or quality.

You sell some of the coins based on the spot price of their metal content. You sell the other coins based on their numismatic value.

After acquiring the coins, you do not undertake any manufacturing process in relation to those coins. On some occasions, you sell and export the coins outside of Australia.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 section 9-5,

A New Tax System (Goods and Services Tax) Act 1999 section 38-185,

A New Tax System (Goods and Services Tax) Act 1999 section 38-385,

A New Tax System (Goods and Services Tax) Act 1999 section 40-100,

A New Tax System (Goods and Services Tax) Act 1999 section 66-5 and

A New Tax System (Goods and Services Tax) Act 1999 section 195-1.

Reasons for decisions

Issue 1

GST is payable on a taxable supply. Section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) states:

You make a taxable supply if:

(a) you make the supply for consideration; and

(b) the supply is made in the course or furtherance of an enterprise that you carry on; and

(c) the supply is connected with Australia; and

(d) you are registered, or required to be registered.

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

From the facts given, you satisfy all the conditions of paragraphs 9-5(a) to (d) of the GST Act as follows:

· you make the supply of the coins for which you receive consideration by way of payments;

· you make the supply in the course or furtherance of your business;

· the supply is connected with Australia as it involves goods being made available in, or removed from, Australia; and

· you are registered for GST.

Accordingly, your supply of the coins will be a taxable supply, unless it is GST-free or input taxed.

Input taxed supply

Section 40-100 of the GST Act provides that a supply of precious metal is input taxed.

'Precious metal' is defined in section 195-1 of the GST Act to mean:

a) gold (in an investment form) of at least 99.5% fineness; or

b) silver (in an investment form) of at least 99.9% fineness; or

c) platinum (in an investment form) of at least 99% fineness; or

d) any other substance (in an investment form) specified in the regulations of a particular fineness specified in the regulations.

Goods and Services Tax Ruling GSTR 2003/10 discusses what is precious metal for the purposes of GST.

Metal gold or silver (or platinum)

To be the metal gold or silver (or platinum), the item must have the character of the metal rather than the character of a thing made from the metal.

A factor that can point to whether something has lost its character as the metal gold is whether it is traded at a price that is determined by reference to the prevailing spot price for the metal. If something is not usually traded at a price determined by reference to the prevailing spot price of its metal content it is not being traded for its metal value only.

For example, proof coins are traded at a price that reflects the quality of the finish over and above what is necessary to trade the metal value. The price is not determined solely by the metal value of the coin. The price is determined by reference to the spot price and by reference to the quality of the physical characteristics of the coin. This means that proof coins are not precious metals. Other examples include numismatic or collectors' coins which are usually traded at prices largely determined by their rarity, condition and beauty. They are therefore not precious metals.

Accordingly, bullion coins (traded solely on the basis of their metal content) are precious metals, whereas proof, other numismatic or collector's coins are not precious metals for GST purposes.

For further information in relation to coins, refer to paragraphs 37 to 47 of GSTR 2003/10 which is enclosed.

Investment form and specified fineness

The gold and silver coins must also be in investment form.

What is 'in an investment form' is not defined in the GST Act; it will therefore take its ordinary meaning. GSTR 2003/10 discusses the expression in paragraphs 14 to 28.

A summary of what is an investment form is stated in paragraph 29 of GSTR 2003/10 which states:

29. To summarise the above, for gold, silver or platinum to be in an investment form for the purposes of the GST Act, it must be in a form that:

· is capable of being traded on the international bullion market, that is, it must be a bar, wafer or coin;

· bears a mark or characteristic accepted as identifying and guaranteeing its fineness and quality; and

· is usually traded at a price that is determined by reference to the spot price of the metal it contains.

The facts indicate that you buy and sell various gold and silver coins. Each coin will need to be assessed to determine whether all the above requirements are satisfied.

However, in addition satisfying all the above requirements, the definition of 'precious metal' requires that the gold and silver (in an investment form) be of the required fineness. That is, at least 99.5% fineness for gold and 99.9% fineness for silver.

You advise that not all the coins bear marks identifying and guaranteeing their fineness or quality. You sell some of the coins based on the spot price of their metal content, while others coins are sold based on their numismatic value. Further, the gold coins do not have a fineness of 99.5% or more, and only some of the silver coins have a fineness of 99.9%.

In relation to the gold coins, you advise that the gold coins do not have a fineness of 99.5% or more, and therefore these coins are not precious metals as defined in section 195-1 of the GST Act.

In relation to the silver bullion coins (which are in investment form, as described above) with a fineness of 99.9% or more are precious metals as defined in section 195-1 of the GST Act. Your sale of these silver bullion coins is an input taxed supply, and is not subject to GST.

In relation to any gold or silver coins that are not precious metals, the sale of these coins is a taxable supply unless the supply is GST-free.

GST-free supply

Section 38-385

Under section 38-385 of the GST Act, a supply of precious metal is GST-free if:

a) it is the first supply of that precious metal after its refining by, or on behalf of, the supplier; and

b) the entity that refined the precious metal is a refiner of precious metal; and

c) the recipient of the supplier is a dealer in precious metal.

Section 38-385 of the GST Act only applies to a supply of 'precious metal' (as defined and discussed above).

From the facts given, you purchase gold and silver coins from private suppliers, and then sell the coins mostly to private collectors. Your acquisition of the coins is not the first supply of a precious metal after refining, you and the private sellers are not refiners, and you are not selling the coins to a dealer in precious metal.

Accordingly, your supply of the gold and silver coins is not GST-free under section 38-385 of the GST Act.

Section 38-185

Section 38-185 of the GST Act discusses the GST-free export of goods. Specifically, item 1 in the table in subsection 38-185(1) of the GST Act (Item 1) is relevant in this circumstance, which states:

Item	Topic	These supplies are GST-free…
1	Export of goods - general	a supply of goods, but only if the supplier exports them from Australia before, or within 60 days (or such further period as the Commissioner allows) after: (a) the day on which the supplier receives any of the *consideration for the supply; or (b) if, on an earlier day, the supplier gives an *invoice for the supply - the day on which the supplier gives the invoice.

Please note that an 'invoice' does not have to be a tax invoice.

Goods and Services Tax Ruling GSTR 2002/6 explains the requirements for a supply of goods to be a GST-free export under items 1 to 4 in the table in subsection 38-185(1) of the GST Act.

Under Item 1, a supply of goods is GST-free where the supplier exports them from Australia and the export occurs before, or within a 60 day period (or such further period as the Commissioner allows).

Accordingly, your sale of the coins is GST-free under section 38-185 of the GST Act if you export them outside Australia before or within 60 days after the earlier of consideration being received, or an invoice being issued. In this circumstance, it does not matter whether the coins (that you sell and export) are classified as precious metals.

Summary

Your supply of the silver coins (or any gold or platinum coins that you may buy and sell in the future) that are classified as precious metals is an input taxed supply, or alternatively the supply of these coins is GST-free if you export them outside Australia within the required period. In this circumstance, the supply is not subject to GST.

Your supply of the gold coins and other silver coins that are not classified as precious metals is a taxable supply. However, if you export these gold and silver coins outside Australia within the required period, the supply of these coins is GST-free.

Issue 2

Division 66 of the GST Act provides that an acquisition of second-hand goods that you make may be a creditable acquisition (allowing you to claim input tax credits) even if the supplier is not registered or required to be registered for GST.

Section 66-5 of the GST Act states:

1) If you acquire second hand goods for the purposes of sale or exchange (but not for manufacture) in the ordinary course of business, the fact that the supply of the goods to you is not a taxable supply does not stop the acquisition being creditable acquisition.

2) However, this section does not apply, and is taken never to have applied, to the acquisition if:

a) the supply of the goods to you was a taxable supply, or was GST-free; or

b) you imported the goods; or

c) the supply of the goods to you was a supply by way of hire; or

d) Subdivision 66-B applies to the acquisition; or

e) you make a supply of the goods that is not a taxable supply.

According to section 195-1 of the GST Act, 'second-hand goods' does not include:

a) precious metal; or

b) goods to the extent that they consist of gold, silver, platinum, or any other substance which would be precious metal if it were of the required fineness; or

c) animal or plants.

Paragraph (a) of the definition of second-hand goods

Any silver coins (or any gold or platinum coins that you may purchase and sell in the future) that are classified as 'precious metals' as outlined in Issue 1 above, are not second-hand goods under paragraph (a) of the definition of second-hand goods.

Paragraph (b) of the definition of second-hand goods

Paragraph (a) of the definition of second-hand goods excludes any precious metal, as defined in the GST Act, from being second-hand goods.

Whereas, paragraph (b) of the definition of second-hand goods provides that second-hand goods do not include goods to the extent that they consist of gold, silver, platinum, or any other substance which, if it were of the required fineness, would be precious metal.

When interpreting paragraph (b), it is important to take into consideration the existence of paragraph (a) in looking at the context of the definition of second-hand goods. That is, paragraphs (a) and (b) are to be viewed as alternative mutually exclusive requirements.

Paragraph (b) of the definition of second-hand goods excludes from second-hand goods those goods that are entirely or partly comprised of a precious metal.

Paragraph (b) of the definition of second-hand goods uses the word 'goods'. The term 'goods' is defined in section 195-1 of the GST Act to mean 'any form of tangible personal property'. Further, paragraph (b) of the definition of second-hand goods uses the phrase 'goods to the extent', which implies that some degree of apportionment is inherent in this paragraph. With the use of the phrase 'any form', paragraph (b) of the definition of second-hand goods operates to exclude goods to the extent that they are comprised of precious metal (of the required fineness) whether they are in an investment form or not.

Paragraph (b) of the definition of second-hand goods has a much broader application than paragraph (a) of this definition. This interpretation is consistent with the apparent intention of Parliament to exclude goods to the extent that they comprise of precious metal of the required fineness, regardless of their form.

Whilst paragraph (b) of the definition of second-hand goods contains the term 'precious metal', the term does not give paragraph (b) the same effect as paragraph (a). The emphasis of paragraph (b) of the definition of second-hand goods is on the term 'the required fineness', which is determined by reference to the requisite fineness stipulated in the definition of precious metals.

Accordingly, gold and silver coins are excluded from being second-hand goods under paragraph (b) of the definition of second-hand goods, but only to the extent of the gold and silver content of the required fineness.

For example, a 24 carat gold ring is non-alloy pure gold (99.9% or higher fineness). Therefore, a previously owned or used 24 carat gold ring is not second-hand goods. On the other hand, for an 18 carat gold ring containing 75% pure gold (99.9% or higher fineness) and 25% other metals, the gold contained in the ring is excluded from being second-hand goods. Any listed precious metals (that is, silver or platinum) contained in the ring will also be excluded from being second-hand goods. Other metals would not be excluded from being second-hand goods.

For completeness, paragraph (c) of the definition of second-hand goods is not relevant in the circumstances described.

You are not entitled to claim an input tax credit under Division 66 of the GST Act to the extent that the coins consist of gold and silver (and platinum) when you purchase these coins from a private supplier(s) that is not registered for GST. You are only entitled to claim an input tax credit under Division 66 of the GST to the extent that the coins consist of non precious metals and components.

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