Edited version of private ruling

Authorisation Number: 1011684612601

This edited version of your ruling will be published in the public Register of private binding rulings after 28 days from the issue date of the ruling. The attached private rulings fac sheet has more information.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. Contact us at the address given in the fact sheet if you have any concerns.

Ruling

Subject: GST and reduced input tax credit on cash delivery services

Issue 1

Are you entitled to a reduced input tax credit, under item 29 of the table in subregulation 70-05.02(2) of the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations), for the acquisition of cash delivery services?

Answer

Yes, you are entitled to a reduced input tax credit, under item 29 of the table in subregulation 70-05.02(2) of the GST Regulations, for the acquisition of cash delivery services.

Relevant facts and circumstances

You are entity A, a GST registered entity carrying on an enterprise consisting of the operation of an ATM network in Australia.

Your enterprise consists principally of a mix of taxable supplies (e.g. supplies by way of lease of ATM infrastructure to financial institutions) and input taxed financial supplies [e.g. supplies for a fee not exceeding $1,000 of the ATM services listed in regulation 40-5.09(4A) of the GST Regulations].

You are not an Australian authorised deposit-taking institution (ADI), and do not carry on a banking business.

The ATMs in respect of which you make input taxed financial supplies are located in a variety of locations such as pubs and shopping centres. None of the ATMs are located on premises that constitute a branch of an Australian ADI.

In order to effectively provide ATM services, you engage contractors to provide services consisting of the delivery and collection of cash ('cash delivery services') to the ATMs from which you make input taxed financial supplies.

You pay the contractor responsible for the provision of the cash delivery services a fee for its services. This fee can either be a fixed amount depending on the amount of cash delivered, or it could be set by reference to the location of the ATMs, or the number of ATMs at the site at which the cash is delivered.

You hold the cash delivered to your ATMs under a bailment agreement which operates broadly as follows:

You inform your partner financial institution that certain ATMs are in need of cash;

Your partner financial institution purchases the cash to be provided to your ATMs;

The contractor engaged to provide cash delivery services delivers the cash purchased by your partner financial institution to your ATMs;

After the cash is delivered to your ATMs, you hold that cash as bailee for your partner financial institution.

You never hold title to the cash delivered to your ATMs. Title passes directly from the contractor responsible for the cash delivery services to your partner financial institution.

Your contractual agreements with your cash delivery suppliers further state that the cash is delivered to you as bailee for your partner financial institution, and that you do not actually hold legal title to the cash.

Reasons for the Decision

Question 1

Are you entitled to a reduced input tax credit, under item 29 of the table in subregulation 70-05.02(2) of the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations), for the acquisition of cash delivery services?

Division 11 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) deals with the entitlement to input tax credits. Section 11-20 of the GST Act provides for an entitlement to an input tax credit for any creditable acquisition made by an entity. Section 11-5 of the GST Act provides that an entity makes a creditable acquisition if:

· it acquired anything solely or partly for a creditable purpose; and

· the supply to it is a taxable supply; and

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

· it is registered or required to be registered for GST.

Of relevance in this ruling is the concept of creditable purpose. What is a creditable purpose is provided for in section 11-15 of the GST Act. Relevantly, that section provides that:

You acquire a thing for a creditable purpose to the extent that you acquire it in carrying on your enterprise.

However, you do not acquire the thing for a creditable purpose to the extent that:

the acquisition relates to making supplies that would be input taxed; or

…..

In operating your ATM network, you are carrying out an enterprise of making both taxable and input taxed supplies. For this reason, your acquisition of cash delivery services would not be for a fully creditable purpose, and you would be unable to claim full input tax credits.

However, in some cases, acquisitions that relate to making financial supplies may attract a reduced input tax credit if these acquisitions are listed, relevantly, in regulation 70-5.02 of the GST Regulations. These acquisitions are termed reduced credit acquisitions. In the case of these acquisitions, you would be entitled to claim reduced input tax credits equivalent to 75% of the GST included in them.

You submit that the cash delivery services acquired by you from your cash delivery contractors fall within item 29(a) of the table in subregulation 70.5.02(2) of the GST Regulations. The relevant portion of item 29(a) is reproduced below:

29. Trustee and custodial services (except safe custody of money, documents and other things), including:

(a)  transfer of cash without purchase, sale or transfer of assets,

excluding cash delivery and collection from branches of Australian ADIs; and

..…

You further submit that for this reason, you should be entitled to claim Reduced Input Tax Credits (RITCs) for the GST included within fees paid for the provision of these services.

Goods and Services Tax Ruling GSTR 2004/1 Goods and services tax: reduced credit acquisitions (GSTR 2004/1) contains the ATO view on the application of Division 70 of GST Act and Division 70 of Part 4-2 of the GST Regulations in relation to reduced credit acquisitions.

The Commissioner's view on item 29 of the table in subregulation 70.5.02(2) of the GST Regulations is that it is primarily concerned with the services provided by trustees, custodians, and single responsible entities, where the services are in relation to property either 'equitably or legally owned by another entity'.

This is supported by paragraph 664 of GSTR 2004/1 which states:

664. The examples listed in items 29(a) to 29(h) indicate that item 29 is directed specifically at custodial and related functions in connection with the holding of a member's (in the case of a superannuation scheme) or an investor's (in the case of a managed investment scheme) assets. These functions may be carried out by either a trustee, as part of the trustee's responsibilities, or by a custodian appointed by a trustee of a fund, or a responsible entity of a managed investment scheme. The custodian may also be appointed by specific agreement with either the trustee, responsible entity or by an investment manager contracted by either.

The term 'Custodial services' is then further explained at paragraph 668 of GSTR 2004/1, which states:

668. Custodial services are recognized as services provided by an entity that holds and safeguards financial assets, such as cash or securities, on behalf of other parties. These services are normally provided by a custodian, and usually include the provision of administrative and accounting functions in relation to the holding of the relevant financial assets.

Item 29(a) of the table in subregulation 70.5.02(2) of the GST Regulations specifically mentions 'transfer of cash without purchase', which we agree appears to be the service acquired by you from your cash delivery suppliers. GSTR 2004/1 at paragraph 688 addresses this type of transaction and states that:

688. An acquisition of a secure cash transport service is an acquisition of a custodial service under item 29 even though such an acquisition would not normally be provided by a trustee or a custodian. The words without purchase, sale or transfer of assets are included to restrict the acquisition of such secure transport services to those cases where the service is provided for a fee, rather than where the cash is actually purchased by the secure cash transport service.

We agree that the cash delivery services acquired by you from your cash delivery contractors fall within item 29(a) of the table in subregulation 70.5.02(2) of the GST Regulations. You are therefore allowed to claim a reduced input tax credit for the GST included in the fee charged to you for the cash delivery services.