Private ruling: Automatic teller machine service fees and financial supplies
Published: May 2012

Ruling: Q1: Is the transaction fee passed on to the end-user (customer) from an EFT machine a financial supply? | A1: Yes, the transaction fee passed on to the customer from an EFT machine is a financial supply.

Relevant facts and circumstances: The entity is a non-Authorised Deposit-taking Institution (ADI) that supplies automatic teller machines (ATMs) and electronic funds transfer (EFT) services. The entity enters into agreements with proprietors to place ATMs and EFT machines at various locations. The entity is registered for goods and services tax (GST). The entity has implemented a method of cash dispensation using EFT facilities. The respective proprietors are responsible for stocking the EFT machine with cash. Unlike an ATM, the EFT machine requires staff interaction to assist customers with withdrawals. The technology behind the ATM and EFT facilities is the same. The customer is not required to purchase anything to withdraw money and anyone can use the EFT machine. Process of EFT machines: The EFT machine is generally situated on a counter on the respective proprietor's premises. The customer advises the service assistant at the EFT machine of the withdrawal he or she wants to make. The service assistant advises the customer of the transaction fee in respect of the withdrawal. The service assistant enters the amount of the withdrawal into their terminal. This amount includes the value, confirmed by the customer, of the transaction fee. The customer swipes his or her card, enters a personal identification number (PIN) and selects a withdrawal amount from their Cheque or Savings account. The customer confirms the amount of the withdrawal on the screen which includes the transaction fee. The EFT machine electronically contacts the customer's bank and receives approval for the withdrawal. The EFT machine dispenses the cash withdrawal minus the transaction fee. The service assistant hands the money to the customer from behind the counter. A receipt is issued to the customer providing details of the transaction and the fee paid for the service. Transaction Fee When a customer uses the EFT machine, the flat fee per transaction can vary between $1 and $2.50. The entity sets the value of this fee after negotiations with the proprietor. This fee is debited from the customer's bank account at the time of withdrawal and paid into the proprietor's nominated bank account. The entity direct debits the proprietor's nominated bank account for its share of the fee at the end of the month for the previous month's transactions. The entity imposes the same transaction fees for the EFT transactions as for its ATMs.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 Section 9-5 and | A New Tax System (Goods and Services Tax) Regulations 1999 Subregulation 40-5.09(4A).

Reasons for decision: Summary: Section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) states that: You make a taxable supply if: · you make the supply for *consideration; and · the supply is made in the course or furtherance of an *enterprise that you *carry on; and · the supply is *connected with Australia; and · you are *registered, or *required to be registered. However, a supply is not a *taxable supply to the extent that it is *GST free or *input taxed. * Denotes a term defined in the GST Act. Division 40 of the GST Act provides that a financial supply is input taxed and a financial supply has the meaning given by the regulations. Relevantly, subregulation 40-5.09(4A) of A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations) states: A supply by an entity for a fee of not more than $1 000 is a financial supply if it is a supply of 1 or more of the following ATM services: (a) a withdrawal from an account; (b) a deposit into an account; (c) an electronic transfer from an account; (d) advice of the balance of an account. Thus, the entity does not make a taxable supply of ATM services. The entity accepts that the above services mentioned in subregulation 40-5.09(4A) it provides in relation to its ATM network are financial supplies and are input taxed. As the expression 'ATM services' is not defined in the GST Act or regulations, its meaning is derived from the context in which it is used. We consider that the expression 'ATM services' directly relates to the four propositions that immediately follow it. Thus, each item is an ATM service. As the entity's EFT facilities provide customers with the ability to withdraw cash from their accounts it is an 'ATM service' for the purposes of subregulation 40-5.09(4A) of the GST Regulations. 'ATM' is defined in Schedule 1 Glossary of Terms in Goods and Services Tax Ruling GSTR 2002/2 Goods and services tax: GST treatment of financial supplies and related supplies and acquisitions (GSTR 2002/2) to be: A customer activated online terminal that enables customers to access account balances, deposit and withdraw cash and transfer funds between accounts. The ATM operates by the insertion of a plastic identification card in the terminal, entry of a personal identification number (PIN) and activation of an instruction keyboard. We consider the EFT machine to fall under this definition of ATM. The EFT machine is akin to an ATM because: · The EFT machine allows a customer to withdraw cash; · The EFT machine operates by insertion of a plastic identification card in the terminal, entry of a PIN and activation of an instruction keyboard; and · The EFT machine is customer activated in the sense that the transaction and communication with the bank is initiated by the customer's insertion of the card and correct entry of the PIN. · The amount is electronically debited from the consumer's account in the same manner as an ATM and the cash is counted and dispensed via the machines in both instances. The technology behind the EFT machine and ATM processes is the same. The charges the entity passes on to the customer for the EFT machine and ATM facilities it provides are the same. The only difference between the two services is that the EFT machine requires staff interaction, whereas the ATMs do not. We do not consider that this distinction warrants the reclassification of the EFT facilities as any other than ATM services because a 'withdrawal from an account' service is still provided and the staff interaction does not fundamentally alter the nature of the service provided. Thus, the services of the kind mentioned in subregulation 40-5.09(4A) of the GST Regulations which the entity provides with the EFT machine are financial supplies and are input taxed. There is no GST in relation to these supplies and therefore, the entity is not eligible to claim input tax credits for these supplies. Accordingly, the transaction fee passed on to the customer from an EFT machine is a financial supply.

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