Edited version of private advice

Authorisation Number: 1051768464914

Date of advice: 29 October 2020

Ruling

Subject: Goods and services tax and digital currency

Question 1

Will you be entitled to an input tax credit (GST credit) in relation to acquisitions made by you in commencing your enterprise?

Answer

Yes, you will be entitled to a GST credits on acquisitions made by you in commencing your enterprise that satisfy the requirements of a creditable acquisition.

Question 2

Do you need to charge and remit GST in relation to your services?

Answer

No, GST is not payable in relation to your services.

Question 3

Is GST payable on supplies of services made by you to resident recipient clients in the indirect tax zone and a non-residents recipient clients not in the indirect tax zone and it is not possible to differentiate whether you will be paid for the services by Australian residents or non-Australian residents?

Answer

GST is not payable in relation to services to a non-resident client who is not in the indirect tax zone when the service is done. These services are GST-free supplies.

GST is not payable in relation to services that are not consideration for your supply.

GST is payable in relation to taxable supplies of transaction services made to recipients in the indirect tax zone (Australia) and no GST is payable in relation to services made to non-resident recipients who are not in the indirect tax zone when the service is done and you have evidence that the supply satisfies the requirements of a GST-free supply.

This ruling applies for the following period:

The date of issue of this private ruling

Relevant facts and circumstances

You are a sole trader who recently started an enterprise which will involve supplying services. You are registered for GST.

You made acquisitions in commencing your enterprise. You paid the supplier consideration for the supply to you. The supplier issued you with a tax invoice which shows an amount of GST.

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 9-15

A New Tax System (Goods and Services Tax) Act 1999 section 11-5

A New Tax System (Goods and Services Tax) Act 1999 section 38-190

Reasons for decision

Question 1 Are you entitled to GST credits on acquisitions on commencing an enterprise?

Under section 11-20 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) you are entitled to the GST credit for any creditable acquisition that you make. You make a creditable acquisition if:

·         you acquire anything solely or partly for a creditable purpose; and

·         the supply of the thing to you is a taxable supply; and

·         you provide, or are liable to provide, consideration for the supply; and

·         you are registered or required to be registered.

You acquire a thing for a creditable purpose to the extent that you acquire it in carrying on your enterprise and the acquisition does not relate to making supplies that would be input taxed or of a private or domestic nature.

An enterprise includes an activity or series of activities in the form of a business or in the form of an adventure or concern in the nature of trade but does not include things done as a recreational pursuit or hobby or by an individual without a reasonable expectation of profit or gain. Carrying on an enterprise includes doing anything in the course of the commencement of that enterprise. Whether your activities constitute an enterprise is ultimately a question of fact.

Where the acquisition is a taxable supply to you, all the requirements of a creditable acquisition will be satisfied giving rise to an entitlement to GST credits. You will be able to claim a GST credit for the GST included in your acquisition provided you hold a valid tax invoice.

Question 2 Is GST payable in relation to your network rewards?

You must pay the GST payable on any taxable supplies that you make in carrying on your enterprise. You make a taxable supply under section 9-5 of the GST Act if you:

·         make a supply for consideration

·         the supply is made in the course or furtherance of an enterprise that you carry on

·         the supply is connected with the indirect tax zone, and

·         are registered or are required to be registered for GST.

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

As you are registered for GST and carrying on your enterprise in Australia the issue is whether the digital currency rewards paid to you are consideration for supplies made by you and if so whether those supplies come within the GST-free or input taxed provisions of the GST Act.

Is there a supply?

A supply for GST purposes includes, amongst other things, a supply of goods or services, the creation, grant, transfer, assignment or surrender of any right, an entry into or release from an obligation to do anything. There are any number of activities undertaken by you in carrying on your enterprise that come within the statutory definition of a supply including activities, service activities and network activities.

Is there consideration with a sufficient nexus to the supply?

The term 'consideration' is defined so as to include any payment, or any act or forbearance, in connection with or in response to or for the inducement of a supply of anything'.

Question 3 What are the GST implications where recipients are non-residents?

As you are making 'supplies for consideration' to recipients some of whom are non-residents who are not in the indirect tax zone (Australia) consideration is given to whether these supplies are GST-free.

Relevantly subsection 38-190(1) of the GST Act sets out in a table those things, other than goods or real property, for consumption outside the indirect tax zone that are GST-free. In particular item 2 in the table in subsection 38-190(1) of the GST Act provides that a supply that is made to a non-resident who is not in the indirect tax zone when the thing supplied is done and

·         the supply is neither a supply of work physically performed on goods situated in the indirect tax zone when the work is done, nor a supply directly connected with real property situated in the indirect tax zone or

·         the non-resident acquires the thing in carrying on the non-resident's enterprise, but is not registered or required to be registered for GST.

GST is payable in relation to all of the supplies of your services where you are unable to determine whether or not or to what extent the services for which the recipient client pays satisfy the requirements for a GST-free supply under subsection 38-190(1) of the GST Act or any other GST-free provision.