EXPLANATORY STATEMENT
Select Legislative Instrument 2009 No. 29
Issued by authority of the Assistant Treasurer
A New Tax System (Goods and Services Tax) Act 1999
A New Tax System (Goods and Services Tax) Amendment Regulations 2009 (No. 1)
Section 177-15 of the A New Tax System (Goods and Services Tax) Act 1999 (the Act) provides that the Governor-General may make regulations prescribing matters required or permitted by the Act to be prescribed, or necessary or convenient to be prescribed for carrying out or giving effect to the Act.
Section 40-5 of the Act specifies that ‘financial supply’ has the meaning given by the regulations.
The purpose of the amending Regulations is to amend the A New Tax System (Goods and Services Tax) Regulations 1999 (the Principal Regulations) to define the supply of certain automatic teller machine (ATM) services as a ‘financial supply’. This ensures that no GST is charged on those ATM transactions.
Under section 40-5, financial supplies are generally input taxed. As a result of sections 9-5, 11-5 and 11-15 of the Act, suppliers incur no GST liability on input taxed supplies, but no input tax credits are available to the supplier for any related acquisitions.
Prior to 3 March 2009, consumers were only charged indirectly for ATM services, through increased bank account charges. However, the Reserve Bank of Australia has introduced rules permitting ATM providers to charge users directly when they make use of the providers’ ATMs from this date. It is expected that individuals using ATMs not operated by their account provider will be charged.
Without the amending Regulations, the GST treatment of supplies of ATM services for which users were directly charged would have differed depending on whether or not the ATM provider was an Authorised Deposit-taking Institution (ADI). If the ATM provider was an ADI, such as a bank or credit union, and the service was provided as part of the supply of a bank account to their own customer, the supply would an input taxed financial supply as the supply of an interest in or under a bank account (sub‑regulation 40‑5.09(3) of the Principal Regulations).
Similarly, if the ATM provider was an ADI, but the service was not provided in relation to an account with that ADI, the supply would still be input taxed as sub-regulation 40‑5.09(4) of the Principal Regulations provides, amongst other things, that supplies by an ADI (for consideration of less than $1000) that would have been financial supplies if supplied in relation to an account with the ADI are financial supplies.
However, if the ATM provider was not an ADI, for example a business whose sole activity was providing and maintaining ATMs, neither sub‑regulation could apply and the supply would have been taxable.
The amending Regulations addressed this anomaly by inserting new sub‑regulation 40‑5.09(4A) into the Principal Regulations, making supplies of specified ATM services for consideration of not more than $1000 input taxed financial supplies. This ensures that supplies of ATM services made by non-ADIs receive the same GST treatment that already applies to supplies made by ADIs.
Public consultation was undertaken on the design and drafting of the Regulations.
The compliance costs associated with this amendment were assessed and determined to be minimal. The Office of Best Practice Regulation agreed with this assessment and determined that a regulatory impact statement was not required.
The Regulations are a legislative instrument for the purposes of the Legislative Instruments Act 2003.
The Regulations commenced on 3 March 2009.
Overview
The A New Tax System (Goods and Services Tax) Amendment Regulations 2009 (No. 1) were enacted to amend the A New Tax System (Goods and Services Tax) Regulations 1999 and were issued under the authority of the Assistant Treasurer. These Regulations were introduced to address a specific issue in the application of the Goods and Services Tax (GST) to automatic teller machine (ATM) services. The problem identified was the potential for inconsistent GST treatment of ATM services depending on whether the ATM provider was an Authorised Deposit-taking Institution (ADI). The objective of the policy was to ensure that ATM services, irrespective of whether provided by an ADI or not, are treated consistently under the GST framework by defining such services as input taxed financial supplies. This ensures that consumers are not subjected to a direct GST charge on ATM transactions, aligning with the broader principle that financial supplies are generally input taxed, thus removing the GST liability for suppliers while preventing input tax credits on related acquisitions.
Scope and Application
The A New Tax System (Goods and Services Tax) Amendment Regulations 2009 (No. 1) are designed to amend the A New Tax System (Goods and Services Tax) Regulations 1999 in relation to the supply of ATM services, ensuring consistency in the application of GST. These Regulations apply to all entities providing ATM services in Australia, irrespective of whether they are Authorised Deposit-taking Institutions (ADIs) or not. They ensure that the supply of certain ATM services is defined as a financial supply and thus input taxed, exempting these transactions from GST. This amendment aims to prevent a disparity in GST treatment based on whether the ATM provider is an ADI or not, thereby maintaining uniformity in tax application. The Regulations came into effect on 3 March 2009 and apply nationally across Australia.
Key Provisions
The New Tax System (Goods and Services Tax) Amendment Regulations 2009 (No. 1) primarily serve to clarify the Goods and Services Tax (GST) treatment of automatic teller machine (ATM) services by classifying them as 'financial supplies' under section 40-5 of the A New Tax System (Goods and Services Tax) Act 1999. This classification ensures that no GST is imposed on ATM transactions, which was previously an ambiguous area due to the different treatment of ATM services provided by Authorised Deposit-taking Institutions (ADIs) versus non-ADIs. Specifically, sub-regulation 40-5.09(4A) was introduced to make supplies of specified ATM services for consideration of not more than $1000 input taxed financial supplies, thereby aligning the GST treatment of ATM services regardless of whether the provider is an ADI or not.
These Regulations impose specific obligations on ATM service providers, ensuring they classify their services correctly as input taxed financial supplies. By doing so, they avoid incurring GST liability on these transactions while also ensuring they do not claim input tax credits for related acquisitions. This classification simplifies the compliance burden for ATM service providers, as it provides a clear and consistent GST treatment for all ATM services, irrespective of whether the provider is an ADI or not.
In terms of legal consequences, the Regulations do not explicitly outline offences or penalties for non-compliance. However, under the broader GST framework, failure to correctly classify supplies or claim input tax credits can lead to civil and criminal penalties. For instance, section 184-5 of the Act allows for civil penalties, including a penalty equal to the amount of GST not paid, interest on the unpaid GST, and a general interest charge. Additionally, section 285-30 of the Act provides for criminal penalties, including fines and imprisonment, for serious or repeated breaches of the GST provisions.
The Regulations thus ensure that ATM service providers can operate within a predictable and compliant framework, mitigating the risk of incurring substantial penalties through non-compliance with the GST laws. By addressing the anomaly in the previous regulations, these amendments enhance the clarity and fairness of the GST system as it applies to ATM services, ensuring that all providers and consumers are treated equitably under the law.