Private ruling: GST and Cash Carrying Services
Published: June 2012

Ruling: Q1: Is the entity, a bank, entitled to claim reduced input tax credits for the following acquisitions: (a) Cash transfer services that involve the transfer of cash to and from ATMs located in premises that are not operated as a branch of the bank? (b) Cash transfer services that involve the transfer of cash between cash depots operated by third parties? (c) Cash transfer services that involve the transfer of cash: i. Between the Reserve Bank of Australia (RBA) and depots operated by third parties? ii. From the Royal Australian Mint (Mint) to depots operated by third parties? | A1: Yes, the bank is entitled to claim reduced input tax credits for the following acquisitions: (a) Cash transfer services that involve the transfer of cash to and from ATMs located in premises that are not operated as a branch of the bank? (b) Cash transfer services that involve the transfer of cash between cash depots operated by third parties? (c) Cash transfer services that involve the transfer of cash: i. Between the RBA and depots operated by third parties? ii. From the Mint to depots operated by third parties?

Relevant facts and circumstances: This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling. The bank has an agreement with a provider various cash management and logistic services The bank incurs a significant amount of cost with the provider in relation to the transfer of cash to and from branches and ATM's located in (or in the vicinity of) branches. The bank is charged a discrete fee for these services and the bank does not seek to claim a RITC in relation to such costs. The acquisition of services under the agreement primarily relate to the following supplies the bank makes: · an interest in or under an account; · an interest in or under a debt or credit arrangement; and · a supply of ATM services. Cash Management Services Pursuant to the agreement, the provider provides services to the bank which enable the bank to manage its cash holding requirements across the branch and ATM network. Broadly, this involves the secure transport, storage and handling of the bank's cash. In accordance with the agreement, title to the cash held by the provider in the course of providing the services under the agreement does not pass to the provider however, it holds liability for the cash when it is in it's possession. The following specific services are acquired by the bank: 1. Secure transport of cash to and from off-site ATMs. That is, ATMs that are not located in premises operated by the bank as a branch but are in stand-alone sites in shopping centres, fuel outlets etc. All such ATMs are owned by the bank; 2. Secure transport of cash between depots operated by the provider; 3. Secure transport of notes to/ from the RBA from/ to provider's depots; 4. Secure transport of coins from the Mint to provider's depots. Cash Transport Services to Off-site ATMs The bank operates approximately a lot of 'off-site' ATMs. Off-site ATMs are located in premises that are not operated by the bank. For example, they are located as stand-alone ATMs in shopping centres, fuel outlets, airports and other public spaces. Off-site ATMs do not include ATMs located in branches, including on external walls or entry halls/ vestibules of branches. Off-site ATM cash transport services involve the following: The bank places a cash order for an off-site ATM delivery with the provider; The provider draws from the bank's cash pool held at the relevant depot and prepares the delivery. Preparation involves counting the cash and filling it into ATM "cassettes" (portable containers that are used to house the cash held within an ATM) ready for dispatch; The cash order is then transported from the depot to the off-site ATM by the provider; At the off-site ATM, the spent cassettes are removed and replaced with the pre-filled cassettes. The spent cassettes removed from the ATM are transported back to the provider's depot. Any remaining cash held in the spent cassettes is removed by the provider at the depot and placed back into the bank's cash pool. Secure transport of cash between depots operated by the provider ("Inter Depot Transfers") Due to fluctuating cash requirements, there is often a need for the bank's cash pool held at one depot to be replenished with cash from another pool held at another depot. The bank incurs a specific cost for this service. Secure transport of cash to or from the RBA/ Mint from the provider's depots From time to time, in order to satisfy the seasonal and varying cash demands, the bank has a need for more cash (eg. at Christmas and Easter). The bank is able to draw notes from the RBA and coins from the Mint to satisfy its varying cash requirements. At the direction of the bank, the necessary drawings of notes or coins are collected by the provider and transported securely (eg. by armoured car) directly to the provider's depot where the cash is added to the bank's pool. The bank also repatriates notes to the RBA when an excess of cash is held in its pool. The notes are transported securely from the provider's depot directly to the RBA for a fee. The bank pays fees for the supply of these services. Neither the RBA, nor the Mint is an Australian authorised deposit-taking institution (ADI) within the meaning of the Banking Act 1959 .

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999. 11-15, | A New Tax System (Goods and Services Tax) Act 1999 11-20, | A New Tax System (Goods and Services Tax) Act 1999 40-2, | A New Tax System (Goods and Services Tax) Act 1999 70-5(1), | A New Tax System (Goods and Services Tax) Regulations 1999 40-5.09 and | A New Tax System (Goods and Services Tax) Regulations 1999 70-5.02(2) .

Reasons for decision: Summary: Section 11-20 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides that an entity is entitled to an input tax credit on any creditable acquisition that it makes. A creditable acquisition is defined by section 11-5 of the GST Act: You make a creditable acquisition if: (a) you acquire anything solely or partly for a *creditable purpose; and (b) the supply of the thing to you is a *taxable supply; and (c) you provide, or are liable to provide, *consideration for the supply; and (d) you are *registered, or *required to be registered. (* denotes terms that are defined in section 195-1 of the GST Act) You acquire a thing for a creditable purpose under section 11-15 of the GST Act, to the extent that you acquire it in carrying on your enterprise. However, paragraph 11-15(2)(a) of the GST Act states that "you do not acquire a thing for a creditable purpose to the extent that the acquisition relates to making supplies that would be input taxed'. Section 40-5 of the GST Act states that financial supplies, as defined by the regulations, are input taxed. The bank's supplies of an interest in or under an account (including a supply of ATM services) and, an interest in or under a debt or credit arrangement are financial supplies provided the elements of subregulation 40-5.09(1) of the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations) are satisfied. Therefore, the bank's acquisitions are not for a creditable purpose as they relate to making input taxed financial supplies. Subsection 70-5(1) of the GST Act provides that certain types of acquisitions specified in the GST Regulations can give rise to an entitlement to reduced input tax credits where they relate to making financial supplies. The table in subregulation 70-5.02(2) of the GST Regulations provides a list of the types of acquisitions which are reduced credit acquisitions for the purposes of subsection 70-5(1) of the GST Act. Reduced credit acquisitions give rise to an entitlement to a reduced input tax credit. Specifically, item 29(a) in the table states: Trustee and custodial services (except safe custody of money, documents and other things), including: a. transfer of cash without purchase, sale or transfer of assets, excluding cash delivery and collection from branches of Australian ADIs; and b. … Goods and Services Tax Ruling GSTR 2004/1 Goods and services tax: reduced credit acquisitions explains the application of Division 70 of the GST Act. Paragraphs 687 and 688 of GSTR 2004/1 provides guidance in relation to item 29(a) and states: | Detailed Reasoning - Item 29(a) - transfer of cash without purchase, sale or transfer of assets, excluding cash delivery and collection from branches of Australian ADIs: 687. Cash means money in a tangible form, banknotes and coin, but excludes cash equivalents such as cheques, orders, etc. F94 The transfer of cash referred to in item 29(a) is the transfer of cash in the physical sense. Where there is an element of safe custody in an acquisition of the transfer of cash by a trustee or custodial services provider, the acquisition of that element will not be a reduced credit acquisition. This is because safe custody is specifically excluded from being a reduced credit acquisition under item 29. 688. An acquisition of a secure cash transport service is an acquisition of a custodial service under item 29 even though such an acquisition would not normally be provided by a trustee or a custodian. The words without purchase, sale or transfer of assets are included to restrict the acquisition of such secure transport services to those cases where the service is provided for a fee, rather than where the cash is actually purchased by the secure cash transport service Whilst the acquisition of secure cash transportation services may qualify as a reduced credit acquisition under Item 29(a), it is specifically excluded where it is for the transportation of cash between branches of an Australian ADI. The word 'branch' is not defined in either the GST Act or GST Regulations and therefore takes its ordinary meaning. In the context of the financial services industry, the word 'branch' means a local operating division of an ADI. The operating division is a fixed location or premises, from which, as a minimum, face-to-face service is provided including cash and other deposits and withdrawals, account keeping facilities and credit and other lending services. Therefore, the exclusion in item 29(a) in the table in subregulation 70-5.02(2) of the GST Regulations relates to ATMs which are located at the business premises of the Australia ADI regardless of whether the ATM is located within or outside of the main operating area. The bank's acquisitions under the agreement are of the secure transportation of cash to the bank's ATM network; in between depots of the provider or to or from the RBA or Mint. The counting, sorting and packing of the cash is part of the transportation service. As title to the cash does not pass to the provider, the transportation of the cash does not involve the sale, purchase or transfer of any assets. The ATMs are not located within the business premises of the bank. Furthermore, the provider, the RBA or Mint are not an Australian ADI and the depots are not located at branches of an Australian ADI. Therefore, the transportation of the cash in these circumstances does not involve the transportation of cash to or from a branch of an Australian ADI. Therefore, the acquisition of the cash transportation services under the agreement to or from the bank's ATM network where the ATMs are not located at the bank branch is a reduced credit acquisition under item 29(a). Consequently, the bank is entitled to a reduced input tax credit for the GST included in the fees charged for these acquisitions.

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