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Edited version of private advice

Authorisation Number: 1051550644144

NOTICE

This edited version has been found to be misleading or incorrect. It does not represent the ATO’s view of the relevant law.

This notice must not be taken to imply anything about:

Edited versions cannot be relied upon as precedent or used for determining how the ATO will apply the law in other cases.

Date of advice: 9 August 2019

Ruling

Subject: GST and acquisition of adviser services

Question 1

Do you make acquisitions from advisers for which you pay Adviser Service Fees (ASFs)?

Answer

Yes, you are making acquisitions from advisers for which you pay ASFs.

Question 2

Are you entitled to reduced input tax credits at the rate of 75% under section 70-5 of the GST Act in relation to acquisitions made for which you pay ASFs?

Answer

Yes, you are entitled to reduced input tax credits at the rate of 75% under section 70-5 of the GST Act for acquisitions made for which you pay ASFs.

Relevant facts and circumstances

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

·  You are not an authorised deposit-taking institution (ADI) for the purposes of the Banking Act (Cth) 1959.

·  You are the operator of and administrator of an Investor Directed Portfolio Service (IDPS).

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999:

·   Section 9-5

·   Section 11-5

·   Section 11-15

·   Section 40-5

·   Section 70-5

·   Section 70-10

·   Division 84

·   Section 84-5

A New Tax System (Goods and Services Tax) Regulations 2019:

·   Subsection 40-5.09(3)

·   Section 70-5.02

·   Subsection 70-5.02(1) item 23(a)

·   Section 196-1.01

Reasons for decision

Section 11-5 of the GST Act provides for the meaning of a creditable acquisition and establishes that an entity makes a creditable acquisition if:

·   it acquires anything solely or partly for a creditable purpose;

·   the supply of the thing to the entity is a taxable supply;

·   the entity provides, or is liable to provide, consideration for the supply; and

·   the entity is registered or required to be registered.

The amount of the ITC for a creditable acquisition is the amount equal to the GST payable on the supply of the thing acquired. However, the acquisition of a thing will not be a creditable acquisition, giving rise to an entitlement to an ITC, if the thing is not acquired solely or partly for a creditable purpose.

In particular, to the extent acquisitions are made in relation to the making of input taxed financial supplies, acquisitions are not made for a creditable purpose and are therefore not creditable acquisitions giving rise to an ITC entitlement.

However, an acquisition is not treated as relating to making supplies that would be input taxed if the only reason it would be so treated is because it relates to making financial supplies and the entity does not exceed the financial acquisitions threshold (subsection 11-15(4) of the GST Act).

The basic rule is modified if the acquisition qualifies as a reduced credit acquisition, in which case the acquirer may be entitled to a reduced input tax credit (RITC).

An acquisition will only qualify as a reduced credit acquisition where all of the above mentioned creditable acquisition requirements (other than the creditable purpose requirement) are satisfied.

Therefore, whether you are entitled to either an ITC or an RITC in respect of the GST payable by an Adviser is dependent on a finding that you acquire something from an Adviser and acquires that thing by way of a taxable supply.

The Commissioner considers that the acquisitions you make from advisers fall within item 23(a) in the table in subsection 70-5.02(1) of the GST Regulations and you are entitled to reduced input tax credits at the rate of 75%.

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