Edited version of private advice

Authorisation Number: 1051923407773

Date of advice: 18 November 2021

Ruling

Subject: GST and importation of precious metal

Question

Is your importation of the Silver coins a non-taxable importation under subsection 13-10(b) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

No.

Relevant facts and circumstances

You ordered a number of pieces of Silver coins of an overseas mint from an overseas retailer. You provided an order confirmation email.

The Silver coins are one ounce 0.9999 fine silver bullion coins. You provided a link to the Silver coins purchased.

The price for the total Silver coins was a certain sum in $$ dollars and with shipment and weight surcharge the total payable price for the purchase was a particular sum. The goods have been shipped into Australia.

You are of the opinion that these Silver coins are exempt from GST. You contend that the price difference between the silver spot price and the price you were charged for these coins does not mean that the price of these Coins price is not determined by reference to the spot price of the metal it contains.

You submit that for bullion coins buyers need to pay a small premium. The premium you paid was comparatively small (one of the smallest gaps between spot and actual price of all silver coins listed on the market) and of the same order of magnitude as one would pay for 1 ounce Kookaburra coins at the Perth Mint, for example. In addition, proof coins or collector coins would have commanded a much higher purchase price.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 subsection 13-10(b)

A New Tax System (Goods and Services Tax) Act 1999 Section 38-385

A New Tax System (Goods and Services Tax) Act 1999 Section 40-100

A New Tax System (Goods and Services Tax) Act 1999 Section 195-1

Reasons for decision

Under subsection 13-10(b) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), an importation is a non-taxable importation if it would have been a supply that was GST-free or input taxed if it had been a supply.

We need to determine whether the supply of the Silver coins that you imported into Australia would have been GST-free and/or input taxed had that supply been made in Australia.

Would the supply of the Silver coins when made in Australia be GST-free and/or input taxed?

In determining whether a supply of the Silver coins would be GST-free or input taxed, it needs to be established whether these Silver coins are precious metal for GST purposes.

Paragraph 41 of Goods and Services Tax Ruling GSTR 2003/10 Goods and Services Tax: What is 'precious metal' for the purposes of GST? (GSTR 2003/10) provides that gold, silver or platinum bullion coins are precious metal for GST purposes if they are of the relevant fineness.

However, GSTR 2003/10 also points out in paragraph 42 that whether a coin is precious metal does not depend on whether the coin is called a bullion coin or a proof or numismatic coin. The relevant test is not what the coin is called but whether it has the character of the precious metal. This will be determined by whether it is traded for its metal content or for other reasons.

Based on the above, the fact that the Silver coins are called 'bullion coins' and are of the relevant fineness does not meant they are precious metal for GST purposes. For them to be precious metal, they still need to meet the precious metal definition.

'Precious metal' is defined in section 195-1 of the GST Act as follows:

precious metal means:

(a) gold (in an investment form) of at least 99.5% fineness; or

(b) silver (in an investment form) of at least 99.9% fineness; or

(c) platinum (in an investment form) of at least 99% fineness; or

(d) any other substance (in an investment form) specified in the regulations of a

particular fineness specified in the regulations.

In your case, the Silver coins you imported are of 99.9% fineness therefore they would be precious metals if they are in investment form.

Paragraph 29 of GSTR 2003/10 summarises what is in an investment form for the purposes of GST Act and states:

To summarise the above, for gold, silver or platinum to be in an investment form for the purposes of the GST Act, it must be in a form that:

• is capable of being traded on the international bullion market, that is, it must be a bar, wafer or coin;

• bears a mark or characteristic accepted as identifying and guaranteeing its fineness and quality; and

• is usually traded at a price that is determined by reference to the spot price of the metal it contains.

In your case, the Silver coins you imported are coins that are cable of being traded on the international bullion market.

In addition, the Silver coins are minted by an overseas mint which is a London Bullion Market Association (LBMA) accredited refiner for silver. As such, the Silver coins bear a hallmark that is accepted as identifying and guaranteeing fineness and quality.

The remaining issue is to determine whether the Silver coins are usually traded at a price that is determined by reference to the spot price of the metal it contains.

It is acknowledged that, when looking at the prices for all silver coins, there is a standard premium over the spot price built into the prices for non-numismatics and non-proof coins as a profit as well as to cover the supplier's other costs. Comparing to the premium that is built into the numismatics and proof coins and other collectable coins, this premium is usually much smaller.

However, in your case, at the time of the purchase, the price for each coin was a specific sum in $$ dollars while the spot price for silver was a lower amount in $$ dollars per ounce. The premium you have paid for the Silver coins is more than 1/3 over the spot price for silver. That is a significant percentage comparing to the standard premium paid over the spot price for silver bullion coins. Its price is significantly above the value of the silver it contains even after taking into account other costs by the merchants that are built into the price. It is considered the value of the Silver coins in question is determined in accordance with the supply and demand for these items based on their novelty and rarity, as well as being influenced by movements in the metal price. These Silver coins are not traded as precious metal.

As such, we do not consider that the Silver coins in question are in an investment form for GST purposes and therefore are not considered precious metal for GST purposes. Therefore, the supply of these Silver coins would not have been GST-free if it were a supply nor would it be input taxed if it were a supply.

As a result, your importation of the Silver coins into Australia is not a non-taxable importation under paragraph 13-10(b) of the GST Act and GST is payable on your importation.