Private ruling: GST and supplies of services made to a resident where the supply is provided to an entity outside of Australia
Date of advice: 24 October 2016
Published: February 2017

Ruling: Q1: Are the supplies of the international money transfers by Entity A to resident entities where the money transfer is destined for a location outside of the indirect tax zone (Australia), GST-free pursuant to item 4 in the table in subsection 38-190(1) of the A New Tax System (Goods and Services Tax) Act 1999 (Item 4)? | A1: Yes

Relevant facts and circumstances: Entity A is been registered for GST. The money transfer service provided by Entity A is an online service whereby a customer makes a payment plus a fee to enable a Payee to receive a guaranteed amount in local currency outside of Australia.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 section 9-5, | A New Tax System (Goods and Services Tax) Act 1999 subsection 38-190(1), | A New Tax System (Goods and Services Tax) Act 1999 subsection 9-30(3), and | A New Tax System (Goods and Services Tax) Regulations 1999 subregulation 40-5.09(3).

Reasons for decision: Summary: A supply is taxable where section 9-5 of the GST Act is satisfied. The section provides that you make a taxable supply if: (a) you make a supply for consideration; and (b) the supply is made in the course or furtherance of an enterprise that you carry on; and (c) the supply is connected with the indirect tax zone (Australia); and (d) you are registered or required to be registered. However, the supply is not a taxable supply to the extent that it is GST-free or input taxed. Entity A makes a supply to a sender for consideration of an international money transfer where the money transfer is to destination outside of Australia, the supply is made in the course of Entity A's enterprise they carry on, the supply is connected with Australia, and Entity A is registered for GST. However, a supply is not taxable to the extent it is not GST-free or input taxed. This supply is input taxed under item 9 in the table in subregulation 40-5.09(3) of the A New Tax System (Goods and Services Tax) Regulations 1999 but it may also be GST-free under subsection 38-190(1) of the GST Act. Supplies of foreign currency transfers may be GST-free under Item 4. Item 4 relevantly provides that 'a supply that is made in relation to rights' is GST-free 'if… the rights are for use outside Australia'. This involves a two-step process. Firstly, determine if the supply of the foreign currency product can be said to be 'made in relation to rights'. Secondly, determine whether the relevant rights are 'for use outside Australia'. | Detailed Reasoning - Delivery of physical currency to a payee outside Australia: Is the supply one that is made in relation to rights? A remittance service differs from a retail foreign exchange transaction where the recipient receives the foreign bank notes. A supply of a remittance service means that the Australian customer wants a specific amount of physical currency available for pick up by a third party payee or delivered to the payee, at an overseas location. The essential character of the supply is to facilitate dealing in rights, being the delivery of physical currency to the payee at an overseas location (rather than the Australian recipient exercising its contractual rights to be paid the funds). When are the rights for use outside Australia? It is accepted that the intended use of the physical currency is outside of Australia, when the recipient of the remittance service supply specifies an overseas location for delivery or pick up by the payee. In that situation, the rights that attach to the physical currency are for use outside of Australia and the supply of a remittance service is GST-free under Item 4. Therefore, Item 4 is satisfied and as to the extent that a supply is both GST-free and input taxed, it is treated as being GST-free pursuant to subsection 9-30(3) of the GST Act.