Private ruling: GST and ATM fees and services
Published: July 2012

Ruling: Q1: Are the service fees paid by the service provider to you, the ATM owner, subject to GST? | A1: No, because you, the ATM owner, are not registered or required to be registered for GST. | Q2: If the service fees are subject to GST and the only income the ATM owner receives is from the service fees, can the ATM owner claim the GST on the purchase of the machines? | A2: No, because you, the ATM owner, are not registered or required to be registered for GST.

Relevant facts and circumstances: You are not registered for goods and services tax (GST). You are considering the purchase of a number of automatic teller machines (ATMs) from two different entities: Entity A and Entity B. Your expected turnover generated from the ATMs is less than $75,000 per annum. Entity A The agreement with Entity A provides that you carry on the business of operating ATMs and, in the course of running your business, engages persons from time to time on a contractual basis to provide services. The 'Service Provider', that is, Entity A, is engaged in the business of providing management, consultation, installation, servicing and maintenance of ATMs and, in relation to those services, also provides and maintains staff, equipment, premises and other related facilities. The 'ATM Service Agreement' allows Entity A, as the Service Provider, to provide the services to you, as Machine Owner, under the terms of the agreement. The services that Entity A is to provide to you are listed in the agreement as ATM management services such as installation, maintenance and transaction processing. These will be referred to in this ruling as 'ATM management services'. The agreement provides that the Machine Owner engages the Service Provider exclusively to provide the Services to the Machine Owner for the Term subject to the terms of the agreement. The Service Provider pays a fee to the Machine Owner under the agreement. The Service Fee is paid monthly. The agreement states that the Service Fee does not include GST. Entity B The agreement with Entity B provides that the machine owner, that is, you, conducts the business of owning ATMs and Entity B conducts the business of installing, servicing and maintaining ATMs. The agreement provides that Entity B will provide ATM management services in respect of the ATM. The agreement also states that Entity B agrees to share the proceeds of the transaction fees with the machine owner. The agreement also provides that Entity B may organise advertising on the ATMs. Entity B will pay the costs and expenses in relation to arranging the advertising on the ATMs and will also pay the machine owner a share of the advertising revenue that Entity B receives from the advertising on the ATMs. The agreement stipulates that the machine owner agrees to use Entity B's services exclusively for the ATMs. The agreement also provides that GST is not payable on the proceeds of the ATM. In your ruling request, you query whether the payments made to you by Entity A and Entity B are financial supplies.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 Sections 9-5, 9-10, 11-15, 23-5, 23-10, 184-1, and 188-15. | A New Tax System (Goods and Services Tax) Regulations 1999 Subregulation 40-5.09(4A).

Reasons for decision: Detailed Reasoning - Detailed reasoning: As there are two agreements in question, one with Entity A and the other with Entity B, the agreements will be discussed separately. | Detailed Reasoning - Entity A: 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: (a) you make the 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 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. * Denotes a term defined in section 195-1 of the GST Act. Section 23-5 of the GST Act provides that you are required to be registered if you are carrying on an enterprise and your GST turnover meets the registration turnover threshold. Section 23-10 of the GST Act provides that you may choose to be registered, despite being below the registration turnover threshold, if you are carrying on an enterprise. The registration turnover threshold is $75,000 per annum. For the purposes of calculating the GST registration turnover threshold, it is necessary to determine your current and projected GST turnover. Section 188-15 states that: Your current GST turnover at a time during a particular month is the sum of the *values of all the supplies that you have made, or are likely to make, during the 12 months ending at the end of that month, other than: (a) supplies that are *input taxed; or (b) supplies that are not for *consideration (and are not *taxable supplies under section 72-5); or (c) supplies that are not made in connection with an *enterprise that you *carry on. * Denotes a term defined in section 195-1 of the GST Act. Your projected GST turnover requires considering the same supplies, but for the next 11 months following a particular month. Registration turnover is important as it is a requirement for being registered for GST. If you are not registered or required to be registered for GST, you do not make a taxable supply. You have indicated that you expect your turnover to be less than $75,000 per annum. Thus you would not meet the minimum registration turnover threshold. Therefore, you are not required to be registered for GST. The meaning of supply is contained in section 9-10 of the GST Act: (1) A supply is any form of supply whatsoever. (2) Without limiting subsection (1), supply includes any of these: (a) a supply of goods; (b) a supply of services; (c) a provision of advice or information; (d) a grant, assignment or surrender of *real property; (e) a creation, grant, transfer, assignment or surrender of any right; (f) a *financial supply; (g) an entry into, or release from, an obligation: (i) to do anything; or (ii) to refrain from an act; or (iii) to tolerate an act or situation; (h) any combination of any 2 or more of the matters referred to in paragraphs (a) to (g). * Denotes a term defined in section 195-1 of the GST Act. A supply is input taxed to the extent that it is a financial supply. Subregulation 40-5.09(4A) in the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations) states that: 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. In this case, you would own an ATM and sign an agreement with Entity A for Entity A to provide ATM management services. To finance these ATM management services, Entity A charges the user of the ATM a service fee per cash withdrawal they make. The supply that Entity A makes to the user of the ATM of the services mentioned in subregulation 40-5.09(4A) of the GST Regulations is a financial supply and is thus input taxed. You would supply to Entity A the right to exclusively provide the ATM management services and the right to earn income from the ATM. You would make this supply for consideration because you are paid a service fee. The supply would be made in the furtherance of an enterprise you carried on and would be connected with Australia. However, you are not registered or required to be registered for GST. Therefore, as you are not registered or required to be registered for GST, you do not make a taxable supply. Accordingly, your supply to Entity A of the right to exclusively provide the ATM management services and the right for Entity A to earn income from the ATM would not be a taxable supply. Provided that you remain not registered for GST or remain not required to register for GST, it is not a taxable supply and no GST is applicable on the Service Fee paid to you by Entity A. | Detailed Reasoning - Entity B: The agreement between you and Entity B differs in that it stipulates that you and Entity B have a share in the proceeds of the ATM. However, for the purposes of subregulation 40-5.09(4A) of the GST Regulations, a supply of ATM services can only be made by an entity . Therefore, only a single entity can make a supply of the ATM services. The term 'entity' is defined in section 184-1 of the GST Act, and does not include the type of arrangement between you and Entity B. Therefore, we consider that it is solely Entity B who makes the financial supply of the ATM services. The supply that you make to Entity B is the right to use the ATM and to be the exclusive service provider for the ATM. In this sense, the analysis of the Entity B agreement is similar to the agreement with Entity A. Entity B charges the user of the ATM a service fee per cash withdrawal they make. This supply is input taxed under subregulation 40-5.09(4A) of the GST Regulations. Although the contract between the machine owner and Entity B varies in how it is worded, the services that Entity B supplies and the nature of the agreement is the same. This is because the contract stipulates that the machine owner conducts the business of owning ATMs and Entity B conducts the business of installing, servicing and maintaining ATMs. In this sense, the machine owner is providing the right to service and maintain the machines for a share of the proceeds of the ATM. Hence, your supply to Entity B of the right to exclusively service the ATM would be a taxable supply if you were registered or required to be registered for GST. As you are not registered or required to be registered for GST, it is not a taxable supply and your share of the proceeds from the ATM is not subject to GST provided that you remain not registered or required to be registered for GST. The agreement also states that Entity B may arrange advertising on the ATMs. In this regard, you would be supplying the right to advertise on the ATM to Entity B. This supply is made in the course of an enterprise you would carry on, be connected with Australia and be for consideration, as you would be paid a share of the revenue. However, it is not a taxable supply as you are not registered or required to be registered for GST. Thus, the revenue you would receive from the advertising on the ATM would not be subject to GST provided that you remain not registered or required to be registered for GST. | Detailed Reasoning - Detailed reasoning: Section 11-5 of the GST Act states: 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 a term defined in section 195-1 of the GST Act. As one of the requirements for making a creditable acquisition is that you must be registered or required to be registered for GST, and you are not registered or required to be registered for GST, you do not make a creditable acquisition in purchasing the ATM. Thus, you are not entitled to an input tax credit for the GST on the purchase of the ATM. You may choose to register for GST by visiting www.abr.gov.au or by asking your tax agent. Once you are registered for GST, you will need to include GST in the price of supplies you make and you may be able to claim input tax credits for the GST included in the price of your business purchases, subject to the requirements stated above. You will also need to report these transactions by completing an activity statement every month or quarter, or an annual GST return.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet.