Private ruling: Is GST payable on pay day loans; is taxpayer is entitled to a refund on overpayments
Published: September 2015
Ruling period: early July 20XX to late December 20YY

Ruling: Q1: Are you liable to pay GST on the supplies of loans you made during the period early July 20XX to late December 20YY? | A1: No | Q2: If the answer to question 1 is no, are you entitled to a refund of any amount of GST you overpaid for the period early July 20XX to late December 20YY? | A2: No

Relevant facts and circumstances: • You operate a business of providing pay day loans to your clients • You were registered for GST from early July 2000 to late December 20YY and accounted for GST on a cash basis • You are currently not registered for GST as your annual turnover does not exceed the registration turnover threshold • The loans you provided during the period early July 20XX to late December 20YY are in terms that are substantially the same as the Small Amount Credit Contract, a template copy of which you have provided to us • The contract shows the loan amount payable at settlement date including the permitted establishment and monthly fees as prescribed in the National Consumer Credit Protection Act 2009 • The contract does not provide for an interest rate • The activity statements you lodged for the period early July 20XX to late December 20YY included amounts of GST payable on the permitted establishment and monthly fees you received during the period. You also claimed input tax credits on your acquisitions that relate to the supplies of loans you made. • On 13 February 2015, you requested the Commissioner to refund the payments you made by requesting revisions to the activity statements you lodged for the period early July 20XX to late December 20YY

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 sections 9-5, 9-30, 9-40, 40-5, | A New Tax System (Goods and Services Tax) Regulation 1999 regulation 40-5.09, 40-5.10, 40-5.12 and | Taxation Administration Act 1953 section 105-55.

Reasons for decision: Summary: You are not liable to pay GST on the supplies of loans you made during the period early July 20XX to late December 20YY because those supplies are input taxed supplies. | Detailed Reasoning - Detailed reasoning: Section 9-40 of the A New Tax System (Goods and Services Tax) Act 1999 (the GST Act) provides that you must pay the GST payable on any taxable supply that you make. Section 9-5 of the GST Act lists the requirements of when you make a taxable supply. In addition, it states that a supply is not a taxable supply to the extent that it is GST-free or input taxed. Section 9-30 of the GST Act provides that: (1) a supply is GST-free if it is GST-free under Division 38 or under a provision of another Act or it is a supply of a right to receive a supply that would be GST- free. (2) a supply is input taxed if it is input taxed under Division 40 or under a provision of another Act or it is a supply of a right to receive a supply that would be input taxed. There is no provision under Division 38 of the GST Act or under a provision of another Act that makes the supply of loans you made during the period early July 20XX to late December 20YY GST-free. Section 40-5 of the GST Act (which is found within Division 40) states that a financial supply, which has the meaning given by the A New Tax System (Goods and Services Tax) Regulations 1999 (the GST Regulations), is input taxed. The GST Regulations identify those supplies that are financial supplies by inclusion and exclusion. Something is a financial supply only if it is mentioned as a financial supply in regulation 40-5.09 or is an incidental financial supply under regulation 40-5.10. Regulation 40-5.12 has the effect of excluding things that might otherwise have been included as a financial supply by regulation 40-5.09. Regulation 40-5.12 does not exclude from being a financial supply something that is also an incidental financial supply. Goods and Services Tax Ruling GSTR 2002/2: GST treatment of financial supplies and related supplies and acquisitions explains and clarifies what is, and what is not, a financial supply under Division 40 of the GST Act and the GST Regulations. Schedule 1 of GSTR 2002/2 describes a loan as a credit arrangement under which the lender provides the use of its funds on specified terms under a business contract. Schedule 2 of GSTR 2002/2 sets out the GST status of supplies and fees commonly provided by financial supply providers. The supplies you made to your clients during the period early July 20XX to late December 20YY are loans that fall within the description of that term in Schedule 1 of GSTR 2002/2. The permitted establishment and monthly fees you charged your clients during the period early July 20XX to late December 20YY fall within line numbers B4 and B23 in Schedule 2 of GSTR 2002/2, as follows: | Detailed Reasoning - GST Status: LOAN TRANSACTIONS B4 Establishment and agreement fees 40-5.09(3) Items 1 & 2 Input taxed B23 Other loan or advance related fees 40-5.09(3) Items 1 & 2 Input taxed Therefore, the supplies of loans you made during the period early July 20XX to late December 20YY are input taxed because they are financial supplies. You were not liable to pay GST on those supplies. | Summary: You are not entitled to a refund of any amount of GST you overpaid for the period early July 20XX to late December 20YY because you did not notify the Commissioner of your entitlement to a refund within four years after the end of the relevant tax period. | Detailed Reasoning - Detailed reasoning: Section 105-55 of Schedule 1 to the Taxation Administration Act 1953 (TAA) provides that you are not entitled to a refund in relation to a net amount in respect of a tax period unless within four years after the end of the tax period you notify the Commissioner that you are entitled to the refund. From the list of tax periods shown in Table 1, the earliest tax period for which you have paid an amount to the Commissioner ended late December 20XX and the latest tax period ended late December 20YY. This means that, in order for your refund entitlement to not cease under section 105-55 of Schedule 1 to the TAA, you need to have given notice to the Commissioner by late December 20ZZ at the earliest and late December 20YY at the latest. The first time you requested a refund was mid-February 20AA when you requested revisions to your activity statements for the tax periods from early July 20XX to late December 20YY. The request you made mid-February 20AA was 4 years after the end of each of the tax periods listed in Table 1. Therefore, you are not entitled to a refund of any amount you overpaid during the period early July 20XX to late December 20YY because you have not notified the Commissioner of your entitlement to the refund within the time required by section 105-55 of Schedule 1 to the TAA.