Key News Summary – The ATO has issued a draft determination that ‘credit card providers’ acquisitions are only partly creditable, as the supply of the credit to the customer is input taxed (as a financial supply) but the supply of payment services, to the merchant, is not.


On Wed 19.12.2018, the ATO issued Draft GST Determination 2018/D1 saying that credit card providers’ acquisitions are only partly creditable.

The draft provides guidance to financial supply providers who issue credit cards or charge cards in a 4-party (open loop) payment system. Various supplies may be made in a 4-party payment system, the key ones being:

  • the supply of the credit card facility, which is an input taxed financial supply (except to the extent that it is GST-free). The ATO says that each credit card transaction, where the cardholder exercises contractual rights, forms part of the supply of the credit card facility, and is not a separate supply in itself; and
  • the supply of interchange services to an acquiring entity, which is a taxable supply.

The draft states that an acquisition will be partly for a creditable purpose, if it has a relevant connection, to both of these supplies (or to the supply of the credit card facility only).

However, the ATO rejects the proposition that all acquisitions in a credit card issuing business will have a relevant connection to both supplies.

PROPOSED DATE OF EFFECT: tax periods starting after the final determination is issued.

COMMENTS are due by 15 February 2019.

[ATO website: GSTD 2018/D1; LTN 245, 19/12/18; Tax Month – December 2018]

FJM 24.1.19

CPD (comprehension) questions

  1. Why is there an ‘input tax credit’ issue, in the supply of credit cards?
  2. What might the other argument have been?
  3. So who else, to credit card companies make supplies to?
  4. Is this supply input taxed (as a financial supply)?
  5. Are the acquisition of inputs only partly creditable?

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