Edited version of private advice

Authorisation Number: 1052203238633

Date of advice: 13 December 2023

Ruling

Subject: GST and acquisition of adviser services

Question 1

Are you making a reduced credit acquisition under section 70-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) for which a reduced input tax credit (RITC) is available where you pay adviser services fees (ASF) to financial advisers who supply adviser services in respect of investors' accounts and investments held by you under a custodial relationship? If so, what is the applicable rate of RITC available?

Answer

No. You are not making a reduced credit acquisition under section 70-5 of the GST Act, and are thus not entitled to a RITC because you are not making a creditable acquisition of a taxable supply from the financial advisers for which the payment of the ASF is consideration. To the extent there is a supply made by the financial advisers to you, the ASF are not consideration for that supply.

Accordingly, the second part of Question 1 does not arise. You are not entitled to claim any RITCs in respect of the ASF.

Question 2

Does Division 84 of the GST Act apply where you acquire supplies of adviser services from non-resident advisers for supplies not connected with the indirect tax zone?

Answer

No. As you do not make an acquisition from the financial advisers for which the ASF are consideration, Division 84 does not apply.

This ruling applies for the following period:

xx April 20xx to xx April 20xx

Relevant facts and circumstances

You provide a range of financial products and services and are the holder of an Australian Financial Services Licence (AFSL).

You are registered for GST in your capacity as trustee and operator of an Investor Directed Portfolio Service (IDPS), which is a financial product in which investors invest indirectly in underlying securities and investments. The IDPS is itself regarded as a managed investment scheme.

Generally, the adviser services considered in this private ruling arise under the following arrangement:

•         An entity (which may or may not already be investing through the IDPS) engages a financial adviser. The investor meets with the adviser to ascertain their investment goals and obtains a Statement of Advice (SOA). You are not party to this engagement. Entities can invest through the IDPS without an adviser.

•         After obtaining a SOA and investing through the IDPS (not necessarily in that order), the investor instructs and authorises you to pay ASF to the adviser (on the investor's behalf) by deducting an amount from the investor's investment portfolio held within the IDPS. ASF may be paid on an upfront, fixed, or ongoing basis.

•         You will only pay ASF to advisers in circumstances where the adviser holds an AFSL and is registered with you. To be registered, the adviser must agree to certain terms and conditions as set out by you. These terms and conditions generally establish an administrative arrangement for the payment of the ASF.

•         If you do not pay the ASF as requested by the investor (for example, because of insufficient funds in the investor's investment portfolio), the investor remains personally liable to the adviser for the ASF.

•         Under no circumstances do you provide personal financial advice to an investor.

Relevant legislative provisions

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

Section 9-5

Subsection 9-20(1)

Section 11-5

Section 23

Section 70-5

Subsection 70-5(1)

Section 189-5

Subdivision 40A

Division 70

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

Subsection 40-5.09(3)

Subsection 70-5.02(1)

Section 70-5.03

Section 196-1.01

Division 70

Reasons for decision

You are not entitled to claims RITCs under section 11-5 and Division 70 of the GST Act and subsection 70-5.02(1) of the GST Regulations in respect of the ASF. The ASF are not consideration for any taxable supply made by the financial advisers to you. To the extent that you may be making an acquisition from the financial advisers (for example in respect of obligations under the Adviser Registration Agreement), the ASF are not consideration for that supply.

It is not necessary to consider the extent of RITCs available, nor the application of Division 84.