GST and credit card processing services supplied to a non-resident

Is the entity, an Australian resident, making a GST-free supply under item 2 in subsection 38-190(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies credit card processing services to a non-resident entity that is not in Australia?

Yes, the entity is making a GST-free supply under item 2 in the table in subsection 38-190(1) of the GST Act when it supplies credit card processing services to a non-resident entity that is not in Australia.

The entity is an Australian resident. The entity supplies credit card processing services to a non-resident entity that is not in Australia.

The entity uses its personal bank account to receive on-line transfers from the non-resident entity's customer's credit card provider. The entity waits until the funds have cleared and then transfers them to the non-resident entity's bank account. The entity's services to the non-resident entity are not financial supplies under section 40-5 of the GST Act.

The non-resident entity acquires these services in carrying on its enterprise. The non-resident entity is neither registered nor required to be registered for goods and services tax (GST).

The entity is registered for GST.

Under section 38-190 of the GST Act, certain supplies of things other than goods or real property, for consumption outside Australia, are GST-free. As a supply of credit card processing services is not a supply of goods or real property, it is appropriate to consider the GST-status of this supply under section 38-190 of the GST Act.

Item 2 in the table in subsection 38-190(1) of the GST Act (Item 2) provides that a supply that is made to a non-resident who is not in Australia when the thing supplied is done, is GST-free where: • the supply is neither a supply of work physically performed on goods situated in Australia when the work is done nor a supply directly connected with real property situated in Australia; or • the non-resident acquired the thing in carrying on the non-resident's enterprise, but is not registered or required to be registered.

In this case, the non-resident entity is not in Australia when the thing supplied is done. In addition, the non-resident entity acquired the services in carrying on its enterprise and is not registered or required to be registered for GST.

Therefore, the entity is making a GST-free supply under Item 2 when it supplies credit card processing services to a non-resident entity that is outside Australia.