Private ruling: financial supplies
Date of advice: 19 February 2026
Published: 7 April 2026
Ruling period: 1 October 20XX to 30 September 20XX
Date scheme commenced: 1 October 20XX

Ruling: Q1: (a) Rollover Fee; (b) Default Management Fee; (c) Failed Direct Debit Fee; (d) Enforcement Costs to the Fund by the Borrower under Agreement 1 or Agreement 2 consideration for a financial supply under section 40-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)? | A1: The payment of (a), (b) and (d) to the Fund constitutes consideration for a financial supply under section 40-5 of the GST Act. The payment of (b) is only applicable to Agreement 2. The payment of (c) to the Fund does not constitute consideration for a financial supply under section 40-5 of the GST Act.

Relevant facts and circumstances: Entity A is a fund manager operating pooled mortgage investment funds, one of which is the Fund. The Fund offers to lend funds to Borrowers. For the purposes of this private ruling, there are two types of arrangements (Agreement 1 and Agreement 2) under which the Fund can lend funds to Borrowers. Both Agreements operate under similar terms and unless otherwise specified reference to Agreement refers to one of the above. All loans under the Agreement are secured by a registered interest over the Borrower or guarantor's (if applicable) real property (or collateral). These properties can be either commercial or residential properties (and in rare instances vacant land). The Fund charges Borrowers or the guarantor (as applicable) various fees and charges. This ruling considers the following fees as described in the relevant Agreement: Table 1: Fees for Agreement 1 and 2 Fee Agreement 1 Description Agreement 2 Description Rollover Fee A fee to be paid by you to us, if your loan fails to be discharged by the last day of the original loan term. A fee to be paid by you and/or the guarantor to us if you and/or the guarantor fail to pay the secured money by the last day of the facility term. The amount of this fee is solely in our discretion and contingent on the length of the rollover and is subject to credit re-assessment at the time the rollover is requested. Default Management Fee Does not exist under Agreement 1 A fee to be paid by you and/or the guarantor to us for the daily management of this facility and recovery of the secured money following an event of default. The Fund also charges Borrowers a fee where the Borrower makes monthly interest payments and the direct debit from their nominated bank account fails (Direct Debit Fee). This fee is charged to compensate costs incurred by the Fund for the failed direct debit request. Under the Agreement, the Borrower must: • pay or reimburse transaction costs, which are reasonable costs in connection with the preparation, negotiation and execution of the Agreement. • Indemnify the Fund against an reimburse and compensate the Fund for any liability or direct loss arising from, and any reasonable costs incurred in connection with the event of default and the Fund exercising or enforcing rights in connection with the Agreement. An 'event of default' can include circumstances where there is non-payment or non-compliance with obligations under the Agreement. Where the Borrower defaults under the Agreement, the Fund engages solicitors and/or real estate agents to enforce their rights under the Agreement and recover amounts owed by the Borrower. Where a Borrower is in default the Fund charges the Borrower costs (Enforcement Costs). The term "Enforcement Costs" is not defined under the Agreement. For the purposes of this private ruling Enforcement Costs refers to payments made by the Borrower (to the Fund) which are equal to a particular cost the Fund incurs as principal for the Fund to recover amounts owed under the Agreement. Enforcement Costs consist of interim legal fees and disbursements invoiced from solicitors, and marketing and sales fees charged by a real estate.

Relevant legislative provisions: A New Tax System (Goods and Services) Tax Act 1999 section 11-5 | A New Tax System (Goods and Services) Tax Act 1999 section 11-20 | A New Tax System (Goods and Services) Tax Act 1999 section 70-5 | A New Tax System (Goods and Services Tax) Regulations 1999 section 40-5.09

Reasons for decision: Summary: The Rollover Fee, Default Management Fee (only applicable to Agreement 2) and Enforcement Costs payable to the Fund by the Borrower constitute consideration received for the provision of an interest in or under a credit arrangement, which is an input taxed (financial) supply. The Failed Direct Debit Fee is not consideration for a supply for GST purposes. | Detailed Reasoning - Detailed reasoning: Subject to some specific exclusions, the provision, acquisition or disposal of an interest mentioned in subsection 40-5.09(3) of the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations) is a financial supply where it satisfies the requirements of subsection 40-5.09(1) of the GST Regulations. The provision, acquisition or disposal of the interest mentioned in subsection 40-5.09(3) of the GST Regulations must be: • for consideration; • in the course or furtherance of an enterprise; • connected with Australia; and • the supplier is registered or required to be registered and is a financial supply provider in relation to the supply of the interest. A transaction between a loan provider and a borrower constitutes a provision of an interest under a credit arrangement, which is an interest mentioned under table item 2 of subsection 40-5.09(3) of the GST Regulations (item 2). In this case, it is not in contention that the Fund's supply of loans to Borrowers constitute financial supplies as all the conditions listed under subsection 40-5.09(1) of the GST Act are satisfied. Goods and Services Tax Ruling GSTR 2002/2 Goods and services tax: GST treatment of financial supplies and relates supplies and acquisitions (GSTR 2002/2) provides more information on the GST treatment of financial supplies and acquisitions. Schedule 2 of GSTR 2002/2 lists supplies of financial interests and related supplies by financial supply providers and financial supply facilitators. Fees, charges and payments received or charged for a supply are generally regarded as consideration (or part of the consideration) for a financial supply rather than a financial supply themselves. For example, fees paid as part of the consideration for a loan are categorised as 'input taxed.' | Detailed Reasoning - Rollover Fee: The Rollover Fee is a fee (being x% of the facility limit per month) to be paid by the Borrower if the loan fails to be discharged on the last day of the original loan term. It is essentially a penalty imposed on the Borrower for not meeting the payment requirements before the due date. The GST treatment of the Rollover Fee is covered under table item B5 of table B.1 of Schedule 2 to GSTR 2002/2 'late payment or penalty fees' (table item 1 and 2 of subsection 40-5.09(3) of the GST Regulations) and is input taxed. Default Management Fee - (Agreement 2 only) The Default Management Fee is a fee to be paid by the Borrower and/or guarantor to the Fund for the daily management of the loan facility and recovery of the secured money following an event of default. $y per day is charged for every day that an event of default is subsisting. The GST treatment of the Default Management Fee is covered under table item B7 of table B.1 of Schedule 2 to GSTR 2002/2 'administration fees' (table item 1 and 2 of subsection 40-5.09(3) of the GST Regulations) and is input taxed. | Detailed Reasoning - Failed Direct Debit Fee: Goods and Services Tax Determination GSTD 2013/1 Goods and services tax: when a payment for a supply fails, is a failed payment fee charged by the supplier consideration for a supply? (GSTD 2013/1) explains circumstances where the payment of a failed payment fee is not consideration for a supply. Paragraph 2 of GSTD 2013/1 states that the Determination applies where: • there is an attempt to make a payment for the underlying supply by way of the supplier presenting a cheque or the supplier attempting a direct debit on the recipient's bank account in accordance with the authority it has from the recipient; • the attempted payment is dishonoured or declined and the supplier's financial institution imposes an 'inward dishonour fee' on the supplier; • the supplier and the recipient have agreed or would be taken to have agreed that in utilising direct debit or cheque payment methods the recipient will have available funds to make the payment of the initial consideration amount for the underlying supply (we accept that this would be the case in the absence of contrary arrangements between the supplier and the recipient) • the supplier and the recipient have agreed that if the payment fails the recipient will be liable to pay a fee ('failed payment fee'), The obligation to pay the failed payment fee may be included in the agreement of contract for the underlying supply, or in the terms of the Direct Debit Authority for a direct debit, or because the supplier's ability to charge a failed payment fee is specified by statute • the failed payment fee arises because the recipient of the underlying supply has not fulfilled its obligation to ensure funds were available to honour a cheque, or meet a direct debit request • the recipient's failure to fulfil its payment obligations causes the supplier to incur additional costs, such as the inward dishonour fee charged by the supplier's financier, or to suffer other loss, such that the failed payment fee is characterised as compensatory for the additional costs or loss incurred; and • there is nothing in the agreement between the supplier and recipient that describes the failed payment fee as part of the consideration for anything supplied by the supplier. The Failed Direct Debit Fee is charged to the Borrower in accordance with the circumstances described above and therefore is not consideration for a financial supply or another supply under section 40-5 or section 9-5 of the GST Act. | Detailed Reasoning - Enforcement Costs: Paragraph 191 to 196 of GSTR 2002/2 discusses recovery and on-charge of expenses and relevantly states: | Detailed Reasoning - Recovery and oncharge: 191. Financial supply providers may incur expenses on behalf of a customer (as agent) or as principal in the ordinary course of providing their services to the customer. 192. Where the cost is incurred as principal, the financial supply provider may seek to build that expense into the fee charged to the customer. We refer to this as 'on-charging'. On the other hand, where the cost is incurred on the customer's behalf, the financial supply provider may seek reimbursement for that amount from the customer. We refer to this as 'recovery' or reimbursement. 193. The principles on agency relationships set out in Goods and Services Tax Ruling GSTR 2000/37 Goods and services tax: agency relationships and the application of the law apply equally to the agent and principal relationships that may exist between a financial supply provider and its customer. The GST treatment of certain costs that are charged for by the financial supply provider depends on whether it incurs the cost as principal or as agent. 194. Where an expense incurred by the financial supply provider is absorbed into the consideration for the financial supply and 'on-charged' to the customer, it will be input taxed. This will be so whatever the type of expense being on-charged and irrespective of whether the on-charged items are listed separately. The expense incurred is treated as an input into the service or supply made by the financial supply provider. 195. For taxes, fees and charges excluded from GST, such as stamp duties, the GST treatment depends on whether the financial supply provider or the customer is liable for meeting the expense. This will determine whether the expense is 'recovered' or 'on-charged' (that is, whether it was incurred as principal or agent) and whether the supply is taxable, input taxed or GST-free. 196. These are the situations contemplated by the examples in Schedule 2 of the GSTR regulations in relation to taxes, fees and charges excluded from GST. On the other hand, where the expense is incurred on behalf of the customer and then reimbursed, the 'recovery' will not of itself be a financial supply. The recovery of the tax, fee or charge from the customer will continue to be excluded from GST. The Enforcement Costs are incurred by the Fund in its capacity as principal and it seeks to build this cost into its supply of the loan to its Borrowers under the terms of the Agreement. This is considered 'on-charging' and will be input taxed as it is absorbed into the consideration for the financial supply. The GST treatment of the Enforcement Costs is covered under table item B74 of table B.3 of Schedule 2 to GSTR 2002/2 'recovery of professional and third party costs in connection with a mortgage' (table item 3 of subsection 40-5.09(3) of the GST Regulations) and is input taxed. | Detailed Reasoning - Conclusion: The Rollover Fee, Default Management Fee (only applicable to Agreement 2) and Enforcement Costs constitute consideration for a financial supply under section 40-5 of the GST Act (i.e. input taxed supply) by the Fund to the Borrower. The Failed Direct Debit Fee is not consideration for a financial supply or another supply under section 40-5 or section 9-5 of the GST Act.

Subject: financial supplies: Question 1 Is the payment of the: