GST issues registers

Financial services - questions and answers

Loans

(a) added, (u) updated, (w) withdrawn

2.1. Are loans subject to GST?

Non-interpretative - other references (see GSTR 2002/2 Goods and services tax: GST treatment of financial supplies and related supplies and acquisitions).

No GST is payable on a loan. It is a financial supply under item 2 in the table in subsection 40-5.09(3) of the GST Regulations and is input taxed.

2.2. Are mortgage repayments subject to GST?

Non-interpretative - other references (see GSTR 2002/2 Goods and services tax: GST treatment of financial supplies and related supplies and acquisitions)

No. A principal repayment of a mortgage is a consequence of a financial supply and no GST will be payable. A repayment of interest on the mortgage represents consideration for a financial supply and no GST will be included.

This is in accordance with item 3 in the table in subsection 40-5.09(3) of the GST Regulations.

2.3. Are establishment fees subject to GST?

Non-interpretative - other references (see GSTR 2002/2 Goods and services tax: GST treatment of financial supplies and related supplies and acquisitions)

No. Establishment fees are consideration for a financial supply and will not be subject to GST. The provision, acquisition or disposal of an interest in a debt is a financial supply under item 2 in the table in subsection 40-5.09(3) of the GST Regulations.

2.4. Are interest-free loans subject to GST?

Non-interpretative - other references (see GSTR 2002/2 Goods and services tax: GST treatment of financial supplies and related supplies and acquisitions)

An interest-free loan is a financial supply, where the loan is provided with the obligation to repayment. No GST is payable. Division 72 of the GST Act will not have any application where the interest-free loan is characterised as a financial supply.

2.5. Are administrative costs charged by the lender for the interest-free loan subject to GST?

Non-interpretative - other references (see GSTR 2002/2 Goods and services tax: GST treatment of financial supplies and related supplies and acquisitions)

The administrative costs of setting up the interest-free loan are for a financial supply and are not subject to GST.

The provision, acquisition or disposal of an interest in an interest-free loan is a financial supply under item 2 in the table in subsection 40-5.09(3) of the GST Regulations.

2.6. What are the GST implications when goods are repossessed?

Non-interpretative - other references (see paragraphs 215 and 216 of GSTR 2000/29 Goods and services tax: attributing GST payable, input tax credits and adjustments and particular attribution rules made under section 29-25)

When a creditor repossesses goods and then sells them to a third party in order to recover its debt, the creditor would be liable for GST on the sale, not the debtor.

The supply by the creditor has the same GST status as if it was made by the debtor. This is in accordance with section 105-5 of the GST Act.

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