On 12.7.17, the Commissioner issued GSTD 2017/1, in which he rules that the supply of a credit card facility is GST-free under para (a) of item 4 in s 38-190(1) of the GST Act to the extent the issuer anticipates that the cardholder (and any additional cardholders) will use the facility to undertake transactions while physically outside Australia.
Extract from Ruling
1. The supply of a credit card facility is GST-free, to the extent that it is anticipated that the credit card facility will be used by the cardholder1 to undertake transactions while they are physically outside Australia. The supply of a credit card facility is a supply made in relation to rights2 within paragraph (a) of Item 4 in subsection 38-190(1).
2. The fact that a credit card facility allows overseas use is not sufficient evidence in itself that the facility will be used by cardholders physically outside Australia.
3. The anticipated use of the credit card facility must be determined objectively. The manner in which the cardholder intends to make use of the rights is reflected by how they intend to use the credit card facility. Anticipated use can be established by reference to past usage patterns of other cardholders for the particular credit card facility while physically outside Australia.
4. Past usage patterns do not include online, phone, fax, mail, or periodic payment transactions with overseas merchants where the cardholder is physically present in Australia (‘card-not-present transactions’). If usage data of cardholders for that credit card facility is not available the issuer may use relevant data from a comparable credit card facility.
5. The location of the merchant accepting the credit card facility as payment does not determine where the rights are for use, and therefore doesn’t determine the extent to which the supply is GST-free.
6. The actual use of the credit card facility is not known when the credit card facility is issued. The issuer will need to determine, on a fair and reasonable basis, the extent the rights are for use inside and outside Australia.
DATE OF EFFECT: The Determination applies from Wed 12.7.2017.
It finalises Draft GSTD 2014/D1 and contains an important change from the Draft, which required the cardholder’s overseas location to be integral to the relevant use of the credit card facility. Following industry consultation, the Commissioner has abandoned this requirement.
[ATO website – GSTD 2017/1; LTN 130, 12/7/17]