ATO ID 2004/820: GST and EFTPOS facilities used by two businesses
Date of decision: 9 July 2002
Business line: Indirect Tax

Issue
Is the entity, a service provider, making an input taxed supply under subsection 40-5(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it allows another business to use its EFTPOS facilities for a fee?

Decision
No, the entity is not making an input taxed supply under subsection 40-5(1) of the GST Act when it allows another business to use its EFTPOS facilities for a fee. The entity is making a taxable supply under section 9-5 of the GST Act.

Facts
The entity is a service provider. The entity subleases part of its business premises to another business. The entity allows the other business to use its EFTPOS facilities. The entity charges this business a fee for each transaction processed using EFTPOS. The entity is registered for goods and services tax (GST) and the supply satisfies the other positive limbs of section 9-5 of the GST Act.

Reasons for decision
Summary: Section 9-5 of the GST Act provides that a supply is not a taxable supply to the extent that it is input taxed. By allowing the other business to use its EFTPOS facilities, the entity is making a supply of services. However, there is a question as to whether this supply is also a financial supply. Under subsection 40-5(1) of the GST Act, a financial supply is input taxed. Subsection 40-5(2) of the GST Act defines a financial supply as having the meaning given by the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations). Subregulation 40-5.09(1) of the GST Regulations provides that in certain circumstances, the provision, acquisition or disposal of an interest listed in subregulation 40-5.09(3) or 40-5.09(4) of the GST Regulations, is a financial supply. The entity subleases part of its business premises to another business and allows the other business to use its EFTPOS facilities. The actual EFTPOS transaction between the bank and the customer is a financial supply under item 1 in the table in subregulation 40-5.09(3) of the GST Regulations. However, in allowing the other business to use its EFTPOS facilities, the entity does not provide, acquire or dispose of an interest in or under any of the items listed in subregulation 40-5.09(3) or 40-5.09(4) of the GST Regulations. Therefore, the entity is not making an input taxed supply under subsection 40-5(1) of the GST Act. The entity is registered for GST and the supply of services satisfies the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under Division 38 of the GST Act nor input taxed under any other provision of Division 40 of the GST Act. Therefore, the entity is making a taxable supply of services under section 9-5 of the GST Act when it allows another business to use its EFTPOS facilities for a fee.

Legislative references: A New Tax System (Goods and Services Tax) Act 1999 section 9-5 Division 38 Division 40 subsection 40-5(1) subsection 40-5(2)
Subject references: Goods and services tax Input taxed supplies GST financial supplies GST non financial supplies GST supplies & acquisitions Taxable supply