Edited version of private advice

Authorisation Number: 1052254194431

Date of advice: 29 May 2024

Ruling

Subject: Entitlement to reduced input tax credits

Question 1

Is a Foreign Bank Branch in Australia (FBB) entitled to 75% reduced input tax credits (RITCs) for certain services acquired from the Foreign Bank's Head Office (FBHO) and the Foreign Bank's Service Centre (FBSC), as closely related entities, in accordance with subsection 70-5.02A(3) of the A New Tax System (Goods and Services Tax) Regulations 2019 (GST Regulations)?

Answer

To the extent the services acquired by FBB from FBHO and FBSC are a cost component that forms part of the overarching support services provided by FBHO and FBSC and match the facts and analysis and fall within certain items in the table in subsection 70-5.02A(3) of the GST Regulations, FBB will be entitled to claim a RITC of 75%.

To the extent that the particular services acquired do not fall within a particular item in the table in subsection 70-5.02A(3) of the GST Regulations, FBB is not entitled to claim a RITC for the acquisition from FBHO and FBSC.

Question 2

Is a Foreign Bank Branch in Australia (FBB) entitled to 75% reduced input tax credits (RITCs) for certain services acquired from FBHO and FBSC, in accordance with subsection 70-5.02(1) of the GST Regulations?

Answer

To the extent the services acquired by FBB from FBHO and FBSC are a cost component that forms part of the overarching support services provided by FBHO and FBSC and match the facts and analysis and fall within certain items in the table in subsection 70-5.02(1) of the GST Regulations, FBB will be entitled to claim a RITC of 75%.

To the extent that the particular services acquired do not fall within a particular item in the table in subsection 70-5.02(1) of the GST Regulations, FBB is not entitled to claim a RITC for the acquisition from FBHO and FBSC.

Relevant facts and circumstances

Foreign Bank Branch (FBB) is an Australian branch of a global banking group which holds an Australian banking licence. FBB provides corporate banking and investment banking services in Australia to wholesale customers.

Foreign Bank's Head Office (FBHO) and the Foreign Bank's Service Centre (FBSC) are closely related entities of FBB.

FBB makes:

•         input taxed financial supplies, such as loans and trade and project finance to Australian wholesale customers

•         taxable supplies, such as management services and BPay services

•         GST-free supplies, such as financial products supplied to non-resident commercial customers.

FBB incurs both local and offshore costs in connection with making these supplies. These costs are enterprise costs that indirectly relate to making its various types of supplies.

FBB's offshore costs are primarily the head office expenses for services supplied and charged by FBHO, and the shared centre service fee charged by FBSC.

FBB's acquisitions from FBHO and FBSC are subject to reverse charge under subsection 84-5(1) of the GST Act.

FBB has, at all times, exceeded the Financial Acquisitions Threshold (FAT). As such, FBB is required to assess whether the acquisition of those services which are subject to reverse charge would also qualify for 75% RITCs under either section 70-5.02 and/or section 70-5.02A of the GST Regulations.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 subsection 84-5(1)

A New Tax System (Goods and Services Tax) Regulations 2019 subsection 70-5.02(1)

A New Tax System (Goods and Services Tax) Regulations 2019 subsection 70-5.02A(3)