Edited version of private ruling

Authorisation Number: 1011672255118

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Ruling

Subject: GST and supply of foreign currency

Question 1

Is a supply of foreign currency made by a foreign currency exchange GST-free under item 4(a) in the table in subsection 38-190(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST ACT) where the acquirer of the currency intends to use the currency overseas?

Answer

Yes, the supply of foreign currency to an acquirer who intends to use that currency overseas is GST-free.

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

Foreign currency is sold to customers in dedicated foreign exchange booths located around Australia.

Foreign currency is sold for Australian Dollars according to a published exchange rate. In addition to the margin you make on the sale of foreign currency, a fee is charged to the customer for each transaction.

The acquirer of the foreign currency may use the foreign currency either in Australia or overseas. This private ruling is only in respect of situations where the customer intends to use the money overseas. This private ruling does not address any evidentiary requirements of establishing where the customer intends to use the foreign currency.

Summary

A supply of foreign currency is a supply in relation to the rights that attach to the foreign currency. Where it is evident that the foreign currency is to be used overseas, the supply is GST-free.

Detailed reasoning

You make the supply of the currency 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 for GST. As such the supply that you make meets all the requirements of paragraphs 9-5(a), 9-5(b), 9-5(c) and 9-5(d) of the GST Act. However, the supply is not taxable to the extent that it is GST-free or input taxed.

Subsection 9-30(3) of the GST Act provides that a supply that would be both GST-free and input taxed is GST-free, except in particular circumstances not presently relevant.

In a recent decision the High Court of Australia (Travelex v Commissioner of Taxation (2010) HCA 33) (Travelex Case), decided that the supply of the currency of a foreign country to a traveller on the departure side of the Customs barrier is GST-free as:

· it is a supply that is made in relation to rights; and

· the rights are for use outside Australia.

French CJ and Hayne J in the judgement in the Travelex Case state at paragraphs 27 and 35:

27. When the supplier sells the foreign currency to the acquirer, the acquirer obtains the rights that attach to, or are constituted by, the ability to use the currency. Because the supply is a supply of property in the currency, the supply is a supply "in relation to" the rights that attach to the currency, without which property in the currency would be worthless.

35. Where it is evident that the currency is to be used overseas, the rights that attach to the currency are for use outside Australia.

The decision of the High Court means that a supply of foreign currency may be characterised as a supply that is made in relation to rights for the purposes of item 4 in the table in subsection 38-190(1) of the GST Act.

The Commissioner accepts that application of the decision of the High Court is not confined to supplies of foreign currency in a currency conversion transaction that takes place on the departures side of the Customs barrier: a supply of foreign currency in a currency conversion transaction that takes place elsewhere in Australia is GST-free if the foreign currency is for use outside Australia. Whether the foreign currency is for use outside Australia in any particular transaction is a question of fact.

This ruling applies only to those supplies where it is evident that the foreign currency is to be used overseas. This ruling does not address the circumstances where it is evident that the foreign currency is not for use overseas nor the level of evidence required to establish that the currency is for use overseas.