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Is the entity, a stockbroker, making a financial supply that is input taxed under subsection 40-5(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies brokerage services?

No, the entity is not making a financial supply that is input taxed under subsection 40-5(1) of the GST Act when it supplies brokerage services. The entity is making a taxable supply under section 9-5 of the GST Act.

The entity is a stockbroker. The entity is supplying brokerage services. The services are performed in Australia for an Australian client.

The entity is registered for goods and services tax (GST). The supply satisfies the other positive limbs of section 9-5 of the GST Act.

Under subsection 40-5(1) of the GST Act, a financial supply is input taxed. Financial supply is defined in the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations).

Subregulation 40-5.09(1) of the GST Regulations provides that in certain circumstances, the provision, acquisition or disposal of an interest listed in subregulation 40-5.09(3) or (4) of the GST Regulations, is a financial supply.

Item 10 in the table in subregulation 40-5.09(3) of the GST Regulations (Item 10) lists securities. However, in this case, the entity is not supplying shares but rather is supplying the share brokerage services. As such, the supply is not covered by Item 10. In addition, the supply is not covered by any other item in the table in subregulation 40-5.09(3) of the GST Regulations, or by subregulation 40-5.09(4) of the GST Regulations.

Furthermore, regulation 40-5.12 of the GST Regulations lists those things which are not financial supplies. Broking services are specified at item 11 in the table in regulation 40-5.12 of the GST Regulations.

Therefore, as the supply of brokerage services is not a financial supply under subregulation 40-5.09(1) of the GST Regulations, the supply is not input taxed under subsection 40-5(1) of the GST Act.

The entity is registered for GST and the supply satisfies the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under Division 38 of the GST Act nor input taxed under any of the other provisions in Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it supplies brokerage services.