Input Taxed Supplies.

  What are input taxed supplies? (Division 40)

  financial supplies (as listed) (Subdivision 40-A);

 residential rent (Subdivision 40-B);

 sale of residential premises (Subdivision 40-C);

 precious metals (after the first supply) (Subdivision 40-D); and

 school tuckshops and canteens (Subdivision 40-E).

 

Like GST-free supplies, no GST is payable on the supply of input taxed supplies, but the supplier is not entitled to input tax credits for the GST included in the price of the things acquired to make the supply.

The following are categories of input taxed supplies:

 

Financial Supplies (Subdivision 40-A)

Financial supplies are generally input taxed. This is consistent with the treatment internationally as there is no readily identifiable way of determining the value for certain supplies of financial services.

 

What are financial supplies?

There are 13 categories of financial supplies found in section 40-5 that are to be input taxed. These include:

 money (ie. currency exchange);

 accounts;

 equity securities;

 debt securities;

 unit trusts;

 futures supplies;

 options and warrants;

 underwriting;

 superannuation funds;

 life insurance;

 hire purchase;

 incidental supplies - directly in connection with any of the above; and

 agreeing to do, or arrange the above.

Section 40-5 provides further explanation of each of the above supplies.

Are there any exclusions from the definition of financial supplies?

Yes.

Section 40-5 also lists seven categories of supplies that are not financial supplies.

These supplies are usually connected with financial supplies but are subject to GST. These include:

 advice;

 insurance;

 legal services;

 accounting services;

 tax agents services;

 safe custody; and

 payroll services.

Subsection 40-5(4) provides for the Regulations to prescribe what is or is not a financial supply.

It is important to note that many financial institutions provide other services that will not qualify as financial supplies.

 

Furthermore, many of the supplies outlined in the definition will be made by entities that are not financial institutions due to the breadth of the financial supply definition.

 

Residential Rent (Subdivision 40-B)

A supply of residential premises (other than commercial residential premises) that is by way of

 lease,

 hire or

 licence

is input taxed.

 

`Residential premises' is defined in section 195-1 to mean

 land or

 buildings

occupied or intended to be occupied as a residence and includes a floating home.

GST is not payable by the supplier, therefore, the rent charged does not include GST.

However, the supplier of the premises is unable to claim any input tax credits for GST included in the price of things acquired for the rental property, such as

 repairs,

 maintenance etc.

 

Supplies of commercial accommodation can also be input taxed if the supplier makes the choice to input tax supplies under Section 87-25 (which is about long-term accommodation in commercial premises). The rationale behind this provision is to align the treatment of residential rent to that of private home owners.

It should be noted that the supply of residential premises is input taxed only to the extent that the premises are used predominantly for residential accommodation. For example, if an entity rents a flat on top of a shop, the supply of the shop will be taxable.

If the supply of residential premises is by way of a long-term lease, the supply is not covered by Section 40-35 but is treated as a sale of residential premises and is input taxed under Subdivision 40-C

 

Sale of Residential Premises (Subdivision 40-C)

The sale of real property including buildings may be:

 a taxable supply;

 input taxed; or

 not subject to GST.

GST would not generally be payable on the sale of an existing family home or when land is sold privately.

This is because a private sale would not satisfy the definition of a taxable supply

 

If an entity is carrying on an enterprise, the sale of real property is generally input taxed to the extent that the property is residential premises to be used predominantly for residential

accommodation (see Section 40-65).

 

However, if the premises are new the sale will not be input taxed. It will be subject to GST. For example, the sale of new residential premises, in a new estate, by registered entities (such as project builders), or the sale of premises that have been converted for residential use (such as warehouses

for CBD office blocks), will be taxable supplies and subject to GST.

A supply of residential premises by way of long-term lease is also input taxed to the extent the residential premises are not:

 commercial residential premises, such as hotels, motels, etc; or

 newly constructed residential premises (section 40-70).

A long-term lease is defined in Section 195-1 to be a lease for a period of at least 50 years.

The reader should also be aware that the sale may be GST-free as a supply of a going concern (see Section 38-325).

 

Precious Metals (Subdivision 40-D)

The supply of precious metals is also input taxed (excluding where it is a first supply which is GST-free).

Precious metals is defined in section 195-1 and is limited to

 gold,

 silver or

 platinum

of certain purity.

Gold jewellery is generally not of sufficient purity to fall into this definition and will be subject to GST.

 

School tuckshops and canteens

(Subdivision 40-E)

School tuckshops and canteens run by non-profit bodies such as a Parents & Citizens association at a primary or secondary school can choose to have the supply of food input taxed.

However, certain conditions need to met, including that the only supplies made by the tuckshop are of food.

The provisionsw will not apply to the supply of food to boarders at a boarding school.

 

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