GST rulings update

In the past month the Australian Tax Office (ATO) has issued two draft rulings, one determination and one draft determination on the following topics:

  • ATM service fees and credit and debit card surcharges – Draft GST Ruling GSTR 2014/D2, issued on 30 July 2014, explains the Commissioner’s preliminary views on the GST treatment of ATM service fees, credit card surcharges and debit card surcharges. It states that:
    • Fees imposed for ATM services listed in subregulation 40-5.09(4A) are consideration for an input taxed supply.
    • Credit and debit card surcharges imposed by merchants form part of the price for the supply of goods and/or services to the customer, and therefore the GST treatment of the surcharge will follow that of the underlying supply. This also applies to credit card surcharges for payment of Australian taxes, fees or charges which are subject to Division 81 of the GST Act.
    • A debit card surcharge imposed for a cash withdrawal transaction is consideration for a taxable supply of accessing the relevant payment system. Where the debit card transaction includes a purchase as well as  a cash withdrawal, the treatment will depend on the nature of the fee. According to the draft ruling, a fixed surcharge forms part of the consideration for the  underlying supply of the goods/services, however where the surcharge is calculated as a percentage of the list price of the goods or services and the amount of cash withdrawn, then the surcharge must be apportioned between the goods and services acquired and the payment system supply, using any fair and reasonable method.

Much of the draft ruling reflects longstanding industry practice. However, the different GST treatments advocated for different types of surcharges for debit card transactions involving cash withdrawal may have practical implications for some merchants. Comments on the draft ruling can be made until 12 September 2014.

  • Bitcoin – Draft GST Ruling GSTR 2014/D3, issued on 20 August 2014, sets out the Commissioner’s preliminary view on the GST treatment of transactions involving bitcoin. In essence, the draft ruling takes the view that bitcoin is not currency, with the following GST consequences:
    • As bitcoin is not ‘money’ within the definition in the GST Act, the transfer of bitcoin is a supply for GST purposes.
    • The supply of bitcoin does not fall within the definition of a financial supply, and will therefore not be input taxed.
    • Accordingly, the supply of bitcoin is a taxable supply where the requirements in section 9-5 are satisfied (and where the supply is not GST-free, e.g. a supply to a non-resident for use outside Australia).

The effect of the Commissioner’s view, which is in accordance with the view taken in a number of other jurisdictions, is that where an entity uses bitcoin to ‘pay’ for goods and services, the transaction will be treated as a barter transaction, and the entity may have a GST liability. Comments on the draft ruling are due by 3 October 2014.

  • Rental yield guarantee payments – GST Determination GSTD 2014/3, issued on 30 July 2014, states that payments made by a vendor to a purchaser of real property when the rent received falls below the rental yield guaranteed by the vendor, give rise to an adjustment event under Division 19 in the particular circumstances set out in the determination. Essentially this is where the rental yield guarantee agreement between the vendor and the purchaser of the real property is integral to the contractual arrangement under which the parties agreed to the terms and set the price for the sale of the property (and where a number of other specified criteria are satisfied).

This means that the vendor will have a decreasing adjustment to the extent that the GST liability applicable to its supply of the real property (with a guaranteed rental yield) was attributable to a prior tax period. If the purchaser’s acquisition of the property is a creditable acquisition, the purchaser will have an increasing adjustment to the extent that its entitlement to an input tax credit was attributable to a previous tax period. In addition, the determination states that for the purposes of the margin scheme, the consideration that the purchaser provides for its acquisition of the property, is reduced by the amount of the rental yield guarantee payment received from the vendor.

  • Transport of passengers by sea – Draft GST Determination GSTD 2014/D3, issued on 20 August 2014, considers the meaning of the term ‘destination outside Australia’ for the purposes of item 1(a) and item 4 of subsection section 38-55 in the GST Act. These subsections provide for:
    • the GST-free treatment of the transport of passengers to, from or outside Australia (Item 1(a), and
    • the transport of passengers on domestic legs of international sea voyages (Item 4).

The draft Determination states that a “destination outside Australia is a specific physical location outside Australia stopped at by the ship where that location is significant to the passenger, having regard to facts and circumstances considered objectively when the transport is purchased. However, the mere fact that a ship goes to, passes by, or travels through a region outside Australia is not sufficient to establish the transport of a passenger to a 'destination outside Australia'.”

Comments are due by 19 September 2014.