GST issues registers

Financial services - questions and answers

Bank accounts

(a) added, (u) updated, (w) withdrawn

3.1. When I deposit or withdraw money do I have to pay GST?

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

The provision of an interest in an account by an ADI is a financial supply under item 1 in the table in subsection 40-5.09(3) of the GST Regulations. A deposit to or withdrawal from the account is not consideration for the provision of an interest in the account and therefore not subject to GST.

3.2. Is interest paid to, or received from, a bank 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)

Interest paid to, or received from, a bank is not subject to GST if it is the consideration for the provision, acquisition or disposal of an interest in or under a bank account or credit account under items 1 and 2 respectively in the table in subsection 40-5.09(3) of the GST Regulations.

3.3. Are account keeping 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. Account keeping fees are not subject to GST. An account keeping fee is related to operating a bank account or credit account and is a financial supply under items 1 and 2 respectively in the table in subsection 40-5.09(3) of the GST Regulations.

3.4. Is a dishonoured cheque fee 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)

GST is not payable on a dishonoured cheque fee. A dishonoured cheque fee charged by an Australian ADI (authorised deposit taking institution) in the course of its banking business is input taxed under item 1 in the table in subsection 40-5.09(3) of the GST Regulations.

3.5. Is the on-charging of a dishonoured cheque fee subject to GST?

This Issue is now superseded by Goods and Services Tax Determination GSTD 2013/1 Goods and services tax: when a payment for a supply fails, is a failed payment fee charged by the supplier consideration for a supply? GSTD 2013/1 was published on 27 February 2013.

This issue previously stated:

Non-interpretative - straight application of the law

The payment made in relation to the on-charge of a dishonoured cheque fee is consideration for the supply of an interest under item 2 in the table in subsection 40-5.09(3) of the GST Regulations, to the extent that the customer has a contractual obligation (express or implied) to make good the loss (the dishonoured cheque fee) incurred by the supplier.

Such a transaction will be a financial supply for the purposes of subsection 40-5(2) of the GST Act, to the extent that the further requirements of subsection 40-5.09(1) of the GST Regulations are met.This analysis is not altered by the fact that the supplier increases the value of the on-charge over and above that which was originally levied on them.

Where no contractual obligation exists, the payment of the on-charged dishonoured cheque fee is a payment made for no supply.

3.6. Is a late payment penalty subject to GST?

Non-interpretative - other references:

•

GSTR 2002/2 Goods and services tax: GST treatment of financial supplies and related supplies and acquisitions

•

GSTR 2000/19 Goods and services tax: making adjustments under Division 19 for adjustment events

This will depend on the facts of each case.

Where the late payment penalty is consideration for a financial supply (for example, a supply of an interest in a credit arrangement), there is no need for the supplier to account for GST for that supply. A charge for late payment penalty that is consideration for a financial supply is not an adjustment event. Where the late payment penalty charge is commercial compensation based on the time value of money (that is, interest), this will indicate that it is consideration for a financial supply.

Where a supplier makes a taxable supply and the recipient incurs a late payment penalty that is not consideration for a financial supply, and that has the effect of changing the consideration, the late payment penalty will give rise to an adjustment event.

Please refer to paragraph 29 of GST Ruling GSTR 2000/19 for further discussions on late payment charges and adjustment events.

3.7. Are financial institutions duty (FID) and bank account debits tax (BAD or BADT) subject to GST?

Non-interpretative - straight application of the law.

FID and BAD (or BADT) are not subject to GST. They were excluded from GST by the Treasurer's determination under Division 81 of the GST Act.

FID has been abolished since 1 July 2001.

BAD (or BADT) has been abolished since 1 July 2005.

3.8. What are the GST implications for the following transactions in relation to credit cards:

Non-interpretative - straight application of the law

(i) Retail sales

Under the cash basis of accounting, the retailer will account for GST on a credit card sale in the tax period in which it receives the signed credit card voucher. When a payment is made (for example, by telephone or through the internet), the consideration is provided and received when the cardholder gives the card number or other required details. (Refer to paragraph 24 of GST Ruling GSTR 2000/23.)

Under the non-cash basis of accounting, the retailer will account for GST on a credit card sale in the tax period in which any of the consideration is received. If an invoice is issued before any of the consideration is received, the retailer will account for GST in the tax period in which the invoice is issued.

This is in accordance with section 29-5 of the GST Act.

(ii) Payment of merchant fees

Generally, financial institutions will charge retailers a commission known as a merchant fee, for use of the credit card system. The commission is calculated on the GST inclusive price of the sale made by the retailer. The financial institution deducts its commission before paying the retailer the remainder of the money from the credit card sale.

The retailer will be entitled to an input tax credit for the GST included in the merchant fee in the tax period in which they receive the tax invoice, provided it is a creditable acquisition under section 11-5 of the GST Act. Example

If the retailer makes credit card sales of $110,000, the retailer's GST liability will be $10,000. If the merchant fee is 0.55%, the retailer will be charged $605 by the financial institution which will include $55 of GST. The financial institution will deduct $605 from the $110,000 and remit the remainder of the money to the merchant.

(iii) Payment of credit card debt

Payment of a credit card debt is a consequence of a financial supply and no GST will be payable.

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