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03 Apr 14 When is the supply of a credit card for use outside Australia GST-free? - GSTD 2014/D1

On 2 April 2014, the ATO released for public comment by 2 May 2014 draft GST Determination GSTD 2014/D1 entitled "Goods and services tax: in what circumstances is the supply of a credit card GST-free under paragraph (a) of Item 4 in subsection 38-190(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?"

The question posed by the draft Determination is answered as follows:

"1. The supply of a credit card facility is a 'supply made in relation to rights' within paragraph (a) of Item 4 in subsection 38-190(1) of the GST Act (Item 4), as it is a supply of a thing comprising a bundle of rights that derives its value exclusively, or almost exclusively, from those rights.

2. The supply of a credit card facility will be GST-free under Item 4 to the extent it is intended that the cardholder will use the facility to undertake a transaction when they are physically outside Australia, provided the cardholder's location outside Australia is integral to the relevant use of the credit card facility.

3. For card-present transactions when the cardholder is overseas, the cardholder must be physically present to tender the card as payment and make the relevant purchase or receive a cash advance. Therefore, the cardholder's location outside Australia is integral to the relevant use of the credit card facility and to that extent the use of the rights in the credit card facility are outside Australia.

4. For card-not-present transactions, the use of the rights in the credit card facility will only be for use outside Australia in those circumstances where the cardholder enters into the transaction when they are physically outside Australia and the cardholder's presence outside Australia is integral to the relevant use of the credit card facility."


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