Edited version of private advice

Authorisation Number: 1051968209337

Date of advice: 4 April 2022

Ruling

Subject: GST and importation of silver bullion coins

Question 1

Are silver bullion coins of 99.9% purity considered a precious metal as defined in the GST Act?

Answer

Yes, silver bullion coins of 99.9% purity are considered a precious metal as defined in the GST Act, provided they are in an investment form.

The following silver bullion coins imported by you are considered a precious metal as defined in the GST Act:

•       1 oz Great Britain Britannia.999 Silver Bullion Coin

•       1 oz South Africa Krugerrand.999 Silver Bullion Coin

Question 2

Is GST payable on the importation of silver bullion coins of 99.9% purity?

Answer

No. GST is not payable on the importation of silver bullion coins of 99.9% purity, provided they are in an investment form.

GST is not payable on your importation of the following silver bullion coins:

•                1 oz Great Britain Britannia.999 Silver Bullion Coin

•                1 oz South Africa Krugerrand.999 Silver Bullion Coin

This ruling applies for the following period:

XX Month 20XX to XX Month 20XX

The scheme commences on:

XX Month 20XX

Relevant facts and circumstances

Since XX Month 20XX, the taxpayer has engaged in an investment scheme where they import into Australia silver bullion coins of 99.9% purity.

The taxpayer is not a dealer in precious metal and is not registered for GST.

The silver bullion coins of 99.9% purity imported by the taxpayer under the scheme bear a mark certifying their fineness and quality. They are widely traded on international bullion markets at a price determined by reference to the prevailing spot price of silver (priced per ounce at 99.9% purity).

Excluded from the scheme are importations of silver bullion coins of 99.9% purity which are not in an investment form. This includes silver bullion coins of 99.9% purity which are traded not only for the value of the silver metal they contain, but also for the value of some other characteristic such as their rarity, condition, or beauty (such as proof coins, or numismatic coins).

On XX Month 20XX, the taxpayer commenced the investment scheme by purchasing one-ounce silver Great BritainBritannia bullion coins of 99.9% purity from a bullion dealer based in Country A. The purchase price of the coins was determined by reference to the prevailing spot price of silver.

Great BritainBritannia bullion coins are produced by the Royal Mint (UK). They bear the hallmarks of the Royal Mint which are internationally accepted as identifying and guaranteeing the fineness and quality of the bullion coins.

The taxpayer engaged an international courier to bring the Britannia bullion coins from Country A to Australia on their behalf.

On XX Month 20XX, the taxpayer was advised by the international courier that their importation of the Britannia bullion coins had been assessed as being subject to import charges totalling $X. The $X importation charge included $X GST and an $X entry charge.

On XX Month 20XX, the taxpayer paid $xx in import charges to the international courier to have the Britannia bullion coins released for delivery.

On XX Month 20XX, the taxpayer purchased additional one-ounce silver South Africa Krugerrand bullion coins of 99.9% purity from the same bullion dealer based in Country A. The purchase price of the coins was determined by reference to the prevailing spot price of silver.

South Africa Krugerrand bullion coins are produced by the South African Mint. They bear the hallmarks of the South African Mint which are internationally accepted as identifying and guaranteeing the fineness and quality of the bullion coins.

The taxpayer engaged an international courier to bring the Krugerrand bullion coins from Country A to Australia on their behalf.

On XX Month 20XX, the taxpayer was advised by the international courier that their importation of the Krugerrand bullion coins had been assessed as being subject to import charges totalling $X. The $X importation charge included $X GST and an $X entry charge.

On XX Month 20XX, the taxpayer paid $X in import charges to the international courier to have the Krugerrand bullion coins released for delivery.

The taxpayer now seeks a private ruling from the Commissioner confirming the GST treatment of importations of silver bullion that they make under the investment scheme.

Relevant legislative provisions

A New Tax System (GST) Act 1999 section 7-1

A New Tax System (GST) Act 1999 section 13-5

A New Tax System (GST) Act 1999 section 13-10

A New Tax System (GST) Act 1999 section 38-385

A New Tax System (GST) Act 1999 section 40-100

A New Tax System (GST) Act 1999 section 195-1

Reasons for decision

All legislative references contained in these reasons are to A New Tax System (GST) Act 1999 (GST Act) unless otherwise stated.

The term 'precious metals' is defined in s 195-1 of the GST Act to include 'silver (in an investment form) of at least 99.9% fineness.'

While 'in an investment form' is not defined in the GST Act, the Commissioner has expressed his interpretation of the term in Goods and Services Tax Ruling 2003/10 Goods and Services Tax: What is 'precious metal' for the purposes of GST?

Considering the ordinary meaning of the term in the context in which it is used, the Commissioner takes the view that for silver to be 'in an investment form' 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.

GSTR 2003/10 at paragraph 29.

The test seeks to distinguish between metals that are traded only for the value of the metal they contain, and metals that are traded for other additional characteristics such as the rarity, condition, or beauty of their form.

This is because the Commissioner considers that there is a distinction between precious metals 'in an investment form' and items that are made from precious metals.

For instance, metals in the form of jewellery, proof coins, or numismatic coins are not considered by the Commissioner to be precious metals for GST purposes (GSTR 2003/10). This is because metals in these forms are traded for their rarity, condition, or beauty and not for their metal value only.

While silver bullion is ordinarily considered to be in an investment form, this does not depend on whether the silver metal is marketed as bullion. Rather, it depends on whether the silver bullion has the characteristics which are necessary to facilitate trade in the value of silver.

On these facts, the taxpayer has imported silver bullion coins of two different types:

•                1 oz Great Britain Britannia.999 Silver Bullion Coin

•                1 oz South Africa Krugerrand.999 Silver Bullion Coin

Despite being produced by different manufacturers, these two silver bullion coins have common salient features.

Both silver bullion coins are in the form of a coin which is tradeable on the international bullion market. They bear hallmarks from an internationally accredited mint which are accepted as identifying and guaranteeing their fineness and quality. The coins are usually traded at a price that is determined by reference to the spot price of silver, indicating that they have the character of silver rather than the character of a thing made from silver.

Following the Commissioner's view as expressed in GSTR 2003/10, both bullion coins are therefore silver in 'an investment form.'

As both bullion coins are 99.9% refined silver (in an investment form), they are considered a precious metal as defined in the GST Act.

Insofar as the taxpayer makes further imports into Australia of silver metals of 99.9% purity, they will be considered a precious metal as defined in the GST Act if they:

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

•                bear a mark or characteristic accepted as identifying and guaranteeing their fineness and quality; and

•                are usually traded at a price that is determined by reference to the spot price of silver.

Under s 7-1 of the GST Act, GST is payable on taxable supplies and taxable importations.

A taxable importation is defined in s 13-5(1) of the GST Act to mean goods entered into Australia for home consumption to the extent that the importation is not a non-taxable importation.

Relevantly, an importation is a non-taxable importation if it would have been a GST-free or input taxed supply if it had been a supply (s 13-10(b)).

A supply of precious metal is an input taxed supply under s 40-100 of the GST Act.

While the first supply of a precious metal after refinement may be a GST-free supply under s 38-385, this GST treatment does not arise on these facts as the taxpayer is not a dealer in precious metal under s 38-385(c).

Consequently, an importation of precious metal by the taxpayer is a non-taxable importation as it would have been input taxed if it had been a supply. No GST is payable on non-taxable importations of precious metal that the taxpayer makes under the scheme.

As answered above, the following silver bullion coins imported by the taxpayer are considered a precious metal as defined in the GST Act:

•                1 oz Great BritainBritannia.999 Silver Bullion Coin

•                1 oz South Africa Krugerrand.999 Silver Bullion Coin

It follows that their importation is a non-taxable importation on which no GST is payable.