Edited version of private ruling

Authorisation Number: 1011848389209

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Ruling

Subject: ATM charges

Question 1

Is Entity A (you) entitled to claim an input tax credit for the switching services charged by a switching company where such services are acquired by you in your role as a manager/deployer?

Answer

Yes. As you make the acquisition of the switching services you are entitled to claim the input tax credit where the acquisition is made in connection with your taxable supply of manager/deployer services to an ATM Investor (Owner).

Question 2

Are you making a taxable supply when the Transaction Fee from the ATM is distributed to:

(a) the site owners (Merchants),

(b) the Owner, and

(c) the switching company?

Answer

No, you do not make a supply when you distribute the Transaction Fee from the ATM to:

(a) the Merchants,

(b) the Owner, and

(c) the switching company.

However the charge by you to the Owner for the supply of your manager/deployer services will be a taxable supply.

Question 3

Are you entitled to claim an input tax credit for the acquisition of imported spare parts?

Answer

No, you are not entitled to claim an input tax credit for the acquisition of imported spare parts.

Relevant facts and circumstances

Entity A (you) operate a business of buying and installing automatic teller machines (ATMs) for yourself and selling ATMs to investors.

You are registered for goods and services tax.

You enter into a contract (Agreement) with an Investor (Owner).

Under the terms of the Agreement you agree to sell 'equipment' to the Owner which includes granting the Owner the right to operate the equipment within the Location Area.

Once you have sold the ATM to an Owner, you provide ongoing services as you remain the manager/deployer of the ATM.

The consideration (payment) you receive from the Owner for the sale of the equipment and ongoing services is composed of an equipment fee and a rebate component.

You have treated the supplies made under the Agreement as a taxable supply to the Owner.

In satisfying your obligations under the Agreement you procure for the Owner a suitable site for an ATM.

The Owner and a site owner (a Merchant) subsequently enter into an ATM Site Agreement (Site Agreement). A copy of the Site Agreement has been provided as part of this ruling request.

You are not party to the Site Agreement.

The Site Agreement provides that the Owner will pay or cause the Merchant to be paid a Merchant's Transaction Fee.

The Merchants Transaction Fee is based on a component of the Transaction Fee charged to the customer when they use the ATM.

You also enter into an ATM Facility Agreement (Facility Agreement) with a switching company.

Under the Facility Agreement the switching company agrees to settle all obligations created by transactions performed at the ATM's, subject to specific terms and conditions.

Some services supplied by the switching company under the Facility Agreement include an amount of GST. You have provided a sample tax invoice showing that GST has been included in the supply by the switching company.

The Owner is not party to the Facility Agreement with the switching company.

You have advised that when an ATM user (customer) uses an ATM, the Transaction Fee is divided between you (as manager/deployer), the switching company, the Owner and the Merchant. For example where an ATM customer is charged a Transaction Fee of $2.50 it is divided according to the following:

Merchant Transaction Fee $Amount-A

Owner $Amount-B

Switching company $Amount-C

Deployer/manager (you) $Amount-D

Using the above example, you have explained the following occurs:

· the full amount of $2.50 is collected by the switching company,

· the switching company will then pay an amount to your bank account (having deducting their fee for service of switching services of $Amount-C).

· you will then pay the Merchant $Amount-A on behalf of the Owner; and

· you charge $Amount-D to the Owner for the supply of services you make as the ongoing deployer/manager of the ATM. This is paid by way of you deducting this amount from the funds you collect, and

· you deposit the remaining funds ($Amount-B) to the Owners bank account.

You have also acquired spare parts which are used to repair the ATMs you sell to Owners as part of a supply of services you make.

You have received an invoice for spare parts you have acquired from an overseas entity. A copy of the invoice has been submitted as part of this ruling request.

The invoice provided by the overseas entity does not include an Australian Business Number, nor is there an amount of GST included in the total invoice.

You have also advised us that the importation of the spare parts was not a taxable importation.

1. Is Entity A (you) entitled to claim an input tax credit for the switching services charged by a switching company where such services are acquired by you in your role as a manager/deployer?

An entity is entitled to an input tax credit under section 11-20 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) where it makes a creditable acquisition. Section 11-5 of the GST Act explains that you make a creditable acquisition if the following requirements are satisfied:

(a) you acquire anything solely of partly for a creditable purpose; and

(b) the supply of the thing to you is a taxable supply; and

(c) you provide, or a liable to provide, consideration for the supply; and

(d) you are registered for GST.

The meaning of the term 'creditable purpose' is defined in section 11-15 of the GST Act which states:

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

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

(a) the acquisition relates to making supplies that are *input taxed; or

…

(terms marked with asterisks (*) are defined in section 195-1 of the GST Act)

You enter into a Facility Agreement with the switching company and make an acquisition of switching services. These services are acquired as part of carrying on your enterprise as a manager/deployer of ATMs owned by investors (Owners).

The supply of your manager/deployer services to an Owner is not a supply which is input taxed under any provision of the GST Act. Therefore, when you acquire the switching services for the purpose of making the taxable supply to an Owner you have made the acquisition for a creditable purpose according to subsection 11-15(1) of the GST Act.

Under the Facility Agreement you are liable to provide consideration to the switching company. The consideration you provide includes and amount for services which are a taxable supply by the switching company. You are registered for GST.

Consequently as you satisfy all the requirements of section 11-5 of the GST Act you will be entitled to claim an input tax credit on the switching services that you acquire as your role as the manager/deployer.

Note: Where you own an ATM and make a GST financial supply to an ATM user, the switching service acquired relate to you making an input taxed supply. As such, in these circumstances you are not entitled to claim an input tax credit.

2. Are you making a taxable supply when the Transaction Fee from the ATM is distributed to:

(a) the site owners (Merchants),

(b) the Owner, and

(c) the switching company?

Section 9-5 of the GST Act states that:

You make a taxable supply if:

(a) you make a 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 or *input taxed.

The first requirement of a taxable supply is that there must be a supply for consideration.

The term supply is defined in section 9-10 of the GST Act as any form of supply whatsoever.

The term consideration is defined in section 9-15 of the GST Act and includes 'any payment, or any act or forbearance, in connection with a supply of anything'.

Merchant and Owner

In providing your ongoing manager/deployer services you also perform the task of distributing amounts deposited into your account by the switching company to a Merchant and the Owner of an ATM. The funds deposited into your bank account by the switching company are held by you on behalf of the Owner as part of managing the Owners ATM.

We do not consider that the amounts you distribute as directed by the Owner represent a taxable supply by you for the following reasons.

As discussed above, to satisfy the requirements for a taxable supply you must be an entity making a supply for consideration.

We are of the view that you are merely acting as an agent in receiving the funds which you then later distribute to the respective entities.

Goods and services tax ruling, GSTR 2000/37, Goods and services tax: agency relationships and the application of the law (GSTR 2000/37), explains the Commissioners view on arrangements involving agency. Paragraph 15 of this ruling states:

15. When an agent uses his or her authority to act for a principal, then any act done on behalf of that principal is an act of the principal. Also, a principal is not bound by acts that are not within the expressed, implied or ostensible authority conferred on the agent. However, the principal may ratify or confirm an unauthorised dealing.

Consistent with paragraph 15 of GSTR 2000/37 we consider that your action of receiving and distributing the funds are not for any supply that you have made. Even though the act of transferring of the funds may amount to a 'supply', we cannot identify any consideration for this supply. Therefore, you will not satisfy paragraph 9-5(a) of the GST Act.

Accordingly, you are not required to report any GST when you receive funds on behalf of the Owner and a Merchant which you later transfer to the Owners bank account and make a payment to a Merchant.

Switching company

It is the switching company that initially collects the funds. Therefore, you do not make any distribution of funds to the switching company.

The amount that is retained by the switching company is for their switching services provided to you.

We haven't identified any supplies being made by you to the switching company. Therefore, in the absence of a supply, you will not be making a taxable supply to the switching company.

Do you make a taxable supply of any other thing?

You do make a supply of your ongoing manager/deployer services under the Agreement to the Owner. The consideration you receive from the Owner for the supply of these services under the Agreement is referred to as the 'rebate' amount.

Therefore based on the example given in the facts, it is our view that the consideration paid by the Owner for the supply of your manager/deployer services is represented by the $Amount-D you retain and the $Amount-C retained by the switching company. Together, these two amounts are the consideration provided by the Owner for your manager/deployer services.

The supply of your manager/deployer services is connected with Australia and you are registered for GST. Further, as the supply of the ongoing manager/deployer services is not GST-free or input taxed you satisfy the requirements of section 9-5 of the GST Act when you make a supply of you manager/deployer services to the Owner.

3. Are you entitled to claim an input tax credit for the acquisition of imported parts?

As explained in decision 1 above an entity is entitled to an input tax credit under section 11-20 of the GST Act where it makes a creditable acquisition.

Based on the facts, your acquisition of spare parts from the overseas supplier will not be a creditable acquisition as the supply of the thing (the spare parts) to you in not at taxable supply. Relevantly, the invoice submitted by you shows that the overseas supplier has not included any GST amount in the supply. Further you have advised that you have not paid any GST on the acquisition, which includes by way of making a creditable importation.

Consequently you will not be entitled to claim an input tax credit on the acquisition of the spare parts because there is no GST included in the price.