Issue
Is the entity, a service provider, making an input taxed supply under subsection 40-5(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it allows another business to use its EFTPOS facilities for a fee?
Decision
No, the entity is not making an input taxed supply under subsection 40-5(1) of the GST Act when it allows another business to use its EFTPOS facilities for a fee.
The entity is making a taxable supply under section 9-5 of the GST Act.
Facts
The entity is a service provider. The entity subleases part of its business premises to another business. The entity allows the other business to use its EFTPOS facilities. The entity charges this business a fee for each transaction.
The entity is registered for goods and services tax (GST) and the supply satisfies the other positive limbs of section 9-5 of the GST Act.
Reasons for Decision
Under subsection 40-5(1) of the GST Act, a financial supply is input taxed. Subsection 40-5(2) of the GST Act defines a financial supply as having the meaning given by the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations).
Regulation 40-5.12 of the GST Regulations provides that a supply is not a financial supply if it is the supply of something, or an interest in something, that is mentioned in the table in the Regulation. Item 4 in the table in Regulation 40-5.12 of the GST Regulations (Item 4) lists 'a payment system'.
Part 2 of Schedule 8 to the GST Regulations (Part 2) provides examples for Item 4. One of the examples is 'access to a payment system, and supply of other related services by a participant in the system to a third party'.
The entity is allowing the other business, a third party, to use its EFTPOS system. This supply is covered by Item 4 and is not a financial supply.
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 other provision of Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it allows another business to use its EFTPOS facilities for a fee.