GST private rulings added to site – November highlights

In November the ATO published over 70 GST private rulings on the Private Rulings Register.  Those rulings can be accessed from the new drop down menu item on the site and here.

Many of the rulings deal with “run of the mill” issues such as registration, real property sales and going concerns, however there are some interesting questions raised.  In particular, I refer to the following rulings:

11011962220496 – GST and credit cards annual fees

The question in this ruling request was whether a credit card annual fee represented consideration for a supply that was partly input taxed and partly GST under item 4 of sub-section 38-190(1) of the GST Act.  The ATO accepted that the fee may be partly GST-free, to the extent that the cardholder intends to use the credit card facility outside Australia.

The applicant’s contentions were as follows:

  • The findings of the High Court in Travelex Ltd v Commissioner of Taxation [2010] HCA 333 should be extended to credit card annual fees. The supply of banknotes was found by the High Court to be “in relation to rights” because it is the rights attaching to the physical banknotes that gave them their value and that this principle applied equally to credit cards, because the, too, have a physical aspect of negligible value without the attached rights (i.e., the plastic card).
  • Whilst the payment of the annual fee is for the issue of the credit card, the annual fee is not consideration for the provision of an interest in or under a credit arrangement.  Rather, it was contended that what the customer obtained when paying the fee was the right to use the credit card, which was  right to credit.  This supply of  aright to credit is GST-free under item 4(a) of subsection 38-190(1) of the GST Act.

With regards to the applicant’s contentions re the decision in Travelex, the ATO considered that the plastic card was clearly distinguishable from foreign currency banknotes – the cardholder acquired no proprietary interest in the card and the card was much less of a token of value and rights than banknotes because it is not, of itself, a negotiable instrument – the card itself has not rights attached to it and it is not money in any form.

The ATO accepted that the credit card facility is a supply that may be additionally characterised as a supply of rights and that the supply may be GST-free as a supply to which s 38-190(1) applied.  For the annual fee to be party GST-free, it would need to be shown that the credit arrangement is specifically intended to be used outside Australia – that is, the cardholder intends to use the credit card facility outside Australia.

101192440447 – GST and Electricity Rebate Agreement

The question here was whether a government entity made a creditable acquisition where it paid money to retailers under an agreement whereby electricity retailers gave a rebate to eligible persons.

Not surprisingly, the ruling agreed that a creditable acquisition was made.  While the basis for this view was GSTR 2006/9 (the Ruling on “supplies”), such a conclusion would appear to be irresistible given the decision of the Full Federal Court in Commissioner of Taxation v Secretary to the Department of Transport (Victoria) [2010] FCAFC 84, which found that the Department was entitled to input tax credits for payments made to taxi cab operators under a program where taxi services were provided to people with disabilities.

More surprisingly, the ruling denied the existence of a creditable acquisition for rebates paid “retrospectively” to rebate customers (being claims for 12 months or more prior to the customer making a separate application for the rebate).  The basis for this view was that the Electricity Retailer had not made a supply to the government entity and the payment for the retrospective rebate was a third party payment.  Rather, the payment to the Retailer was an administrative arrangement to pay on behalf of the customer for a liability owed by the customer to the Retailer.

Given that both the rebate and the Retrospective rebate are payment under the same arrangement between the government entity and the Electricity Rebate, one may have cause to doubt the existence of a real distinction between those payments.  The decision may also show that the Commissioner is still not comfortable with the decision in Department of Transport and is seeking to give that decision a narrow compass.

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