In November the ATO published over 70 GST private rulings on the Private Rulings Register.

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.

LIST OF RULINGS

Taxable supplies

• GST and temporary occupation of land by a government entity – whether Entity A is making a taxable supply when a government entity entered and temporarily occupies A’s land pursuant to state legislation – whether GST chargeable on rent and outgoings sharged to government entity
• GST and taxable supplies – whether proposed merger of entities will be an amalgamation for the purposes of Division 90 of the GST Act
• GST and forestry managed investment schemes – whether establishment services fees and specified fees charged to participants consideration for a taxable supply, whether supply of forestry rights and establishment services taxable supply
• GST and forestry managed investment scheme – whether forestry services fee and put option fee consideration for a taxable supply
• GST and exploration tenement and compensation payments – whether liable for GST on compensation payments received from exploration company pursuant to compensation & access agreement

Supply

• GST and supplies – is a supply made between A (government corporation) and C where A contracts with B to make a supply to C

Consideration

• GST and consideration for a supply – whether the consideration for the supply of a user licence by Government Entity A to Government Entity B includes non-monetary consideration being the amount of any capital improvement undertaken by B
• GST treatment of poker tournament payments and prizes – whether payments from tournament poker player consideration for a taxable supply (including entry fee, buy in, re-buy or add-on, whether prize pool distribution a supply of money and therefore not a supply

Creditable acquisitions

• GST and Electricity Rebate Agreement – whether government entity makes creditable acquisitions when pay amounts to electricity retailers under the agreement
• GST and forestry managed investment schemes – whether entitled to input tax credits for GST imposed by manager of scheme
• GST and participation in a forestry managed investment scheme – whether participant entitled to input tax credits for fees imposed by manager for establishment services, grant of put option, issue of land land unit trusts
• GST and carrying on an enterprise – whether trustee carrying on enterprise and entitled to be registered for GST and to claim input tax credits, trust merely holds shares and bank accounts
• GST and entitlement to GST refund or credit – whether entitled to claim input tax credits for periods in which did not claim credits, claim outside 4 year limitation period, whether Commissioner has discretion to allow refunds or credits outside the 4 year period
• GST and creditable acquisition of funding – where entity enters into Deed of funding with C, whether entity makes a creditable acquisition, whether funding is consideration for a taxable supply
• GST and payments of subsidies to rural general practitioners – whether entity is making a creditable acquisition when it reimburses general practitioners for expenses incurred by them when they make a claim

Real Property

• GST and sale of subdivided land – taxpayer acquired property with existing house for purpose of improvement and sale, subsequently decide to demolish house and subdivide land for sale, whether carrying on enterprise, whether isolated transaction in nature of trade
• GST and sale of a residential property – whether sale of residential property with development approval subject to GST, whether new residential premises
• GST and the supply of vacant real property – land purchased with intention of constructing private residence, taxpayer registered for enterprise of retail sales, whether sale of vacant land subject to GST
• GST and subdivision of land – taxpayer purchased land several decades ago and used for farming, decided to sell land and to subdivide to maximise proceeds, whether scale of development sufficient for an enterprise to be carried on
• GST and the liability to pay GST on the sale of properties – owner of land sold property, bank provided release over property in exchange for full sale proceeds, whether owner or bank liable to pay GST
• GST and the sale of land – owner purchased vacant lot for the purpose of constructing residential premises to live in, constructed fences and concrete slabs, whether sale of land subject to GST
• GST registration and turnover issues – owner bought residential property with intention to subdivide and build new residential unit and minor renovations to existing house and to rent both out, then decided to sell properties, no input tax credits claimed on construction costs, whether carrying on an enterprise and required to register for GST
• GST and registration – owner of residential premises subdivides land and sell the blocks, whether carrying on an enterprise and required to register for GST
• GST and the margin scheme – whether methods of apportionment of acquisition for properties sold under the margin scheme fair and reasonable, gross realisation method, lot number method, area basis method
• GST and sale of residential property – applicant purchased residential property and used for residential rent, associate acquired adjoining property and both sought development approval for the two its, whether sale of house with development approval subject to GST, whether required to register
• GST and property – applicant purchased premises which had previously been used as medical rooms but vendor lived there at time of sale, property zoned commercial, whether entitled to input tax credits, whether input taxed supply
• GST and the supply of real property which includes a vacant house – whether supply of land with single vacant house taxable
• GST and sale of residential rent properties – whether sale of adjacent properties which have been rented out taxable supplies
• GST and the margin scheme – whether margin scheme available for sale of apartments, apportionment of acquisition price for purchase of development site
• GST and sale of real property by mortgagee in possession – whether mortgagee in possession can apply margin scheme for sale of property, whether property eligible for margin scheme
• GST and construction of new property on subdivided land – whether there are any GST implications on subdivision of rental property
• GST and subdivision of land – whether sale of vacant lots subject to GST, whether required to be registered and carrying on an enterprise
• GST and lease of part of property held jointly – whether the lease of part of the property subject to GST by each co-owner individually or by the tax law partnership, whether required to register
• GST and supply of vacant land – whether sale of vacant land input taxed where property vacant because of fire damage to properties on land which were intended to be sold as input taxed supplies

Supply of going concern

• GST and supply of going concern – supply of share of interest in commercial property by trustee to purchaser, trust acquired land and engaged C to construct office building for lease, trustee and C entered into agreement for lease with tenant
• GST and supply of going concern – whether acquisition of commercial property a creditable acquisition or going concern, vendor actively marketing property for lease, parties not yet agreed in writing that a going concern
• GST and supply of going concern – whether supply of interests in joint venture by participants a going concern, whether each participant carrying on enterprise as participant in joint venture
• GST and supply of going concern – whether the sale of an interest in a joint venture to the other joint venture participant is a going concern, whether carrying on an enterprise
• GST and sale of a going concern – whether sale of interest of participant in petroleum joint venture a going concern
• GST and supply of a going concern – the vendor owned a number of commercial premises, most of which were tenanted but some were vacant but the agents were actively looking for tenants, whether sale of property a going concern
• GST and sale of going concern – whether sale of business and freehold to separate entities a going concern
• GST and supply of going concern – whether sale of property by member of GST group, where property leased to other group member, going concern

GST-free supplies

• GST and supply of bone injection funds and defibrillators – whether supplies GST-free as medical equipment
• GST and the sale of pastry products – whether the sale of unfilled pastry products subject to GST, whether GST-free supply of “food” or taxable supply of “bakery products”
• GST and medical aids and appliances – whether sale of medical aid appliances gst-free, whether supply of batteries incidental or separate supply
• GST classification of dairy dessert – whether supply of a dairy desert GST-free as supply of food or taxable as food of a kind being “cakes, slices, cheesecakes, pancakes, waffles, crepes, muffins and puddings”
• GST and supplies made to non-resident entity – whether corporate advisory services to an overseas entity (B) in relation to an IPO on the ASX GST-free pursuant to Item 2 in subsection 38-190(1) of the GST Act, whether B in Australia when the services were supplied
• GST and baby food snack bars – whether “fruit snack bars” GST-free as baby food or taxable as muesli bars or health food bars
• GST and home medicine reviews – whether supply of a home medicine review by a pharmacist contracted by a pharmacies GST-free, whether single supply of home medicine review or separate supplies of home medicine review and supply to pharmacy of conducting review on their behalf
• GST and supply of medical aids – whether the supply of medical aids is GST-free
• GST and supply of migration services – whether supply of migration services to foreign nationals located overseas GST-free supplies, whether it matters if fees paid for by person in Australia
• GST and export of second hand goods – whether the sale overseas of donated second hand goods taxable or GST-free
• GST and sale of farmland – whether farming activities ceased prior to sale of property, whether dominant use of the land for primary production

Input taxed supplies

• GST and credit card annual fees – whether credit card annual fee consideration for supply that is part input taxed and part GST-free

Adjustments

• GST: 4 year rule and Division 129 – whether entitled to claim a decreasing adjustment, whether Commissioner notified of entitlement within 4 years

Other

• GST and tax invoices – how do you rectify a mistake where GST was not included for a taxable supply – contractual matter between parties
• GST and the supply of goods and services in relation to voucher – whether the supply of deal vouchers by an Australian entity through A to customers in Australia a taxable supply
• GST and fees and charges – whether payment of  fee within Division 81 of the GST Act
• GST and waste management services – whether charges for waste management services by local government will be exempt from GST from 1 July 2012
• GST and government charges – whether long service leave charge covered by Division 81
• GST and council fees – whether fees paid for residential parking permits consideration for taxable supply
• GST and registration – whether statutory agency of a government department required to register separately for GST
• GST and fees and charges – whether charges for facilities and services subject to Division 81