Issue
Is the entity, a financial institution, making an input taxed financial supply under subsection 40-5(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies access to its internet banking services to its personal and business customers and charges a monthly access fee to these customers?
Decision
Yes, the entity is making an input taxed financial supply under subsection 40-5(1) of the GST Act.
Facts
The entity is a financial institution. The entity is an authorised deposit-taking institution (ADI) which provides its customers with internet banking services in the course of its banking business within the meaning of the Banking Act 1959 .
The entity supplies to its personal and business customers access to their accounts via its internet banking services. Customers can use this service to access their accounts to perform everyday account transactions. The entity charges these customers a monthly access fee for the internet banking services. The entity arranges a PIN number for its customer to access its internet banking services. The entity does not supply the computer software.
The supply is made in the course of the entity's enterprise and is connected with Australia. The entity is registered for goods and services tax (GST).
Reasons for Decision
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) (subsection 40-5(2) of the GST Act).
Subregulation 40-5.09(1) of the GST Regulations provides that the provision, acquisition, or disposal of an interest mentioned under subregulation 40-5.09(3) or 40-5.09(4) of the GST Regulations is a financial supply if: (a) the provision, acquisition or disposal of that interest is: • for consideration • in the course or furtherance of an enterprise • connected with Australia, and (b) the supplier is: • registered or required to be registered for GST, and • a financial supply provider in relation to the supply of the interest.
Item 1 in the table in subregulation 40-5.09(3) of the GST Regulations (Item 1) lists an interest in or under an account made available by an Australian ADI in the course of its banking business within the meaning of the Banking Act.
It needs to be determined whether the monthly access fee is consideration for the entity's supply of an interest in or under an account.
The entity is an ADI that provides its customers with internet banking services in the course of its banking business within the meaning of the Banking Act.
Item A65 in Schedule 2 to Goods and Services Tax Ruling GSTR 2002/2 provides that a 'software access fee' is not a financial supply. However, the software access fee listed at A65 in Schedule 2 to GSTR 2002/2 is a fee charged for the provision of software maintenance and support services. It is normally charged by a bank in relation to the computer banking software which provides a link between a customer's and an issuing bank's computer system. It is not in relation to the provision of a bank account or transactions involving a bank account.
However, the entity is not supplying software to its customers. The entity arranges a PIN for its customers to enable its customers to access their accounts to perform everyday account transactions through the internet banking services. Therefore, the monthly access fee is consideration for the entity's supply of an interest in or under an account under Item 1.
The supply is made in the course of the entity's enterprise and is connected with Australia. The entity is registered for GST and, as they provided the interest, is the financial supply provider in relation to the supply of the access to its internet banking services (regulation 40-5.06 of the GST Regulations).
Accordingly, the supply satisfies the requirements of subregulation 40-5.09(1) of the GST Regulations and the entity is making an input taxed supply under subsection 40-5(1) of the GST Act when it supplies access to its internet banking services to its personal and business customers and charges a monthly access fee.