Edited version of private advice

Authorisation Number: 1052054230501

Date of advice: 3 November 2022

Ruling

Subject: GST - financial supplies

Question

Is your supply of the spend management platform a taxable supply that is subject to GST?

Answer

No. Your supply of the spend management platform is an input taxed composite supply.

This ruling applies for the following period:

x November 20xx to x November 20xx

The scheme commences on:

x January 20xx

Relevant facts and circumstances

You are a private company domiciled in Australia.

You are registered for GST.

You are not an Australian authorised deposit-taking institution (ADI) within the meaning of the Banking Act 1959.

You are a financial technology company which has built the spend management platform for use by businesses.

Through the spend management platform you provide businesses with credit card and charge card facilities.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999

section 9-5

section 40-5

A New Tax System (Goods and Services Tax) Regulations 2019

section 40-5.09

Reasons for decision

All legislative references contained in these reasons are to the A New Taxation System (Goods and Service Tax) Act 1999 (GST Act), unless otherwise stated.

Section 9-5 of the GST Act provides that you make a taxable supply if:

(a)  you make the 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 the indirect tax zone (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 phrase 'to the extent that' in section 9-5 allows for supplies which are made up of separately identifiable elements to be divided into taxable and non-taxable parts.

In Goods and Services Tax Ruling 2001/8 Goods and services tax: Apportioning the consideration for a supply that includes taxable and non-taxable parts (GSTR 2001/8), the Commissioner explains his view on identifying whether a supply includes taxable and non-taxable parts.

As the Commissioner states at paragraph 40 of GSTR 2001/8, components of a transaction should be separately recognised where a provision of the GST Act specifically requires it. However, this does not mean that the components need to be separately recognised for all purposes of the GST Act.

Your supply of credit card and charge card facilities under the spend management platform are financial supplies of an interest in or under a credit arrangement under item 2 of the table in subsection 40-5.09(3) of the A New Tax System (Goods and Services Tax) Regulations 2019 (GST Regulations). A financial supply is input taxed under subsection 40-5(1) of the GST Act.

Therefore, it is necessary to unbundle these financial supplies from your supply of the spend management platform to determine whether the supply is mixed or composite.

A composite supply is a supply that contains a dominant part and includes something that is integral, ancillary or incidental to that part. You treat a composite supply as a supply of a single thing (GSTR 2001/8 at [17]).

A mixed supply is a supply that has to be separated or unbundled as it contains separately identifiable taxable and non-taxable parts that need to be individually recognised (GSTR 2001/8 at [16]).

The question is whether your bundled supply of the spend management platform contains a dominant part and includes something that is integral, ancillary, or incidental to that part. Or, whether the parts of the supply are separately identifiable and retain their own identity or significance.

At paragraph 59 of GSTR 2001/8, the Commissioner has provided indicators that a part may be integral, ancillary, or incidental to the dominant part of the supply, noting that a common sense and practical approach should be taken and that no single factor is determinative:

•         you would reasonably conclude that it is a means of better enjoying the dominant thing supplied, rather than constituting for customers an aim in itself; or

•         it represents a marginal proportion of the total value of the package compared to the dominant part; or

•         it is necessary or contributes to the supply as a whole, but cannot be identified as the dominant part of the supply; or

•         it contributes to the proper performance of the contract to supply the dominant part.

In our view, the dominant element of your supply of the spend management platform is the financial supply of an interest in or under a credit arrangement. Objectively, a business would want to acquire the spend management platform primarily for the provision of credit.

While the spend management platform has certain features that seek to set it apart from other credit and charge card providers, these features provide administrative functions that are merely ancillary and incidental to the dominant supply of credit.

Other features provided through the spend management platform are integral to facilitating business use of the credit and charge card facilities that you provide under the spend management platform.

Taking a common sense and practical approach, we therefore regard your supply of the spend management platform as a composite supply that is essentially a single financial supply of an interest in or under a credit arrangement.

As the Commissioner states at paragraph 18 of GSTR 2001/8, a composite supply is either taxable or non-taxable. Your composite supply of the spend management platform is non-taxable as it is an input taxed financial supply.

Therefore, the supply is not subject to GST, and there is no entitlement to an input tax credit for the things that you acquire or import to make the supply under sections 11-15 and 15-10 of the GST Act.