ATO ID 2002/264: GST and modification of coin-operated devices
Date of decision: 14 November 2001
Business line: Indirect Tax

Issue
Is the entity, the owner and operator of coin-operated devices, eligible to make an election under section 24C of the A New Tax System (Goods and Services Tax Transition) Act 1999 (Transition Act) to treat supplies made from its coin-operated devices as input taxed supplies, when it modifies the coin-acceptor mechanism of its coin-operated devices from accepting multiple denominations of coin to accepting $1 coins only?

Decision
No, the entity is not eligible to make an election under section 24C of the Transition Act to treat supplies made from its coin-operated devices as input taxed supplies, when it modifies the coin-acceptor mechanism of its coin-operated devices from accepting multiple denominations of coin to accepting $1 coins only.

Facts
The entity is the owner and operator of coin-operated devices which make supplies of tangible personal property and services. The maximum consideration for the supplies from the coin-operated devices is $1. Up to and including 1 July 2000, the coin-operated devices accepted multiple denominations of coin and did not give change. After 1 July 2000, the entity modified the coin-acceptor mechanism of its coin-operated devices to accept $1 coins only. The supplies from the coin-operated devices are not gambling supplies. The entity is registered for goods and services tax (GST).

Reasons for decision
Summary: Section 24C of the Transition Act allows an entity to make an election to treat certain supplies from coin-operated devices as input taxed supplies. This transitional measure only applies to supplies made on or after 1 July 2000 but before 1 July 2005. Subsection 24C(1) of the Transition Act provides that a supply of tangible personal property or a service from a mechanical coin-operated device is input taxed if: The entity's coin-operated devices make supplies of tangible personal property and services. These supplies are not gambling supplies. The devices were operating on 1 July 2000 and the supplies are being made before 1 July 2005. Since being modified, the devices only accept one denomination of coin. However, as at 1 July 2000 (prior to modification) the devices accepted more than one denomination of coin. The maximum consideration for the supplies from the coin-operated devices is $1. The coin-operated devices do not give change. Section 24C of the Transition Act is not clear as to whether the concession applies to devices that did not satisfy paragraph 24C(1)(b) of the Transition Act as at 1 July 2000 but which were subsequently modified to accept only one denomination of coin after 1 July 2000. Subparagraph 15AB(1)(b)(i) of the Acts Interpretation Act 1901 provides that consideration may be given to material not forming part of the Act to determine the meaning of a provision when the provision is ambiguous or obscure. Any explanatory memorandum relating to the Bill containing the provision or any relevant report of a committee of the Parliament or of either House of the Parliament before the time when the provision was enacted, are extrinsic materials that may be considered for this purpose (paragraphs 15AB(2)(e) and (c) of the Acts Interpretation Act). Paragraph 1.21 of the Explanatory Memorandum relating to the Taxation Laws Amendment Bill (No. 8) 2000 (EM) states that '...The concession is designed to allow operators of coin-operated devices further time to convert the device to accept a wider range of coins or payment options.' Furthermore, paragraph 1.56 of the Senate Economics Legislation Committee (SELC) report states: 'Presently some coin-operated devices take only certain denominations of coins. These machines cannot be easily or quickly converted to allow them to take other denominations of coins, thus the machines cannot immediately be adapted to take account of the GST. The Bill recognises this and allows supplies from some, and only some, coin-operated machines to be input taxed, thus effectively allowing more time for businesses to adapt their machines...' The EM together with the SELC report confirm that the purpose of the concession in section 24C of the Transition Act was to allow operators of coin-operated devices that accept only one denomination of coin, additional time to convert those devices to accept a wider range of coins. The concession was not intended to apply to operators who had coin-operated devices that accepted multiple denominations of coins as at 1 July 2000, but who subsequently modified these devices to accept only one denomination in order to take advantage of the concession. Therefore, it is considered that the concession in section 24C of the Transition Act only applies if the requirement in paragraph 24C(1)(b) of the Transition Act was satisfied as at 1 July 2000. In this case, as at 1 July 2000, the coin-operated devices did not meet the requirement in paragraph 24C(1)(b) of the Transition Act because at that time, the devices accepted multiple denominations of coins. As such, the entity is not eligible to make an election under section 24C of the Transition Act to treat supplies made from its coin-operated devices as input taxed supplies.

Legislative references: A New Tax System (Goods and Services Tax Transition) Act 1999 section 24C subsection 24C(1) paragraph 24C(1)(a) paragraph 24C(1)(b) paragraph 24C(1)(c)
Other references: Explanatory Memorandum relating to the Taxation Laws Amendment Bill (No. 8) 2000 paragraph 1.21 Senate Economics Legislation Committee paragraph 1.56
Subject references: Goods & services tax GST transitional issues Special transitional rules