GST and Loan Intermediary Services: Australia

Australia’s goods and services tax (GST) follows the conventional VAT model and treats loan intermediary services as input taxed (exempt) supplies. Financial supplies are defined in regulations in terms not greatly different than found elsewhere. However, the Australian rules contain a number of features not usual elsewhere, reflecting in part different features of the Australian financial system such as the surcharge commonly imposed on sales paid by credit card. A general apportionment rule for input tax credits related to making financial supplies and taxable supplies is supplemented by a de minimis rule that allows many businesses to avoid the need for apportionment of input tax. A unique measure that deems some financial acquisitions to be financial supplies removes any possibility of investors claiming input tax credits. Another rule, adopted to remove the financial institution self-supply bias that favours large financial institutions over smaller competitors unable to bring some services in-house, provides a special ‘reduced input tax credit’ (usually 75% of the input tax) for selected inputs used by financial suppliers in the course of making supplies of loan intermediary services.