NO.013

The Treasurer today announced details of a new test to simplify GST compliance for

small businesses which provide financial services as an incidental part of their business.

The new measure allows a registered entity to make a limited amount of financial

supplies without being denied any input tax credits.

Almost all businesses make supplies in the nature of a financial supply. Trade credit,

for example, often includes interest charges. Under the Australian GST system, financial

supplies are input taxed. One of the principal consequences of a supply being input taxed

is that an input tax credit is not available for any GST liability incurred in making the

supply in question.

The new financial services de minimis test is based on a determination of the

amount of input tax credits which relate to the financial supplies made by a registered

entity. The level of input tax credits under which a registered entity will not be denied

any input tax credits is $50,000 or 10% of the entity’s total input tax

credits. For example, by applying the $50,000 level, a registered business will not be

denied any input tax credits until $550,000 of its taxable inputs are acquired for the

purpose of making financial supplies.

The new financial services de minimis test is being introduced to ensure

administrative simplicity for Australian businesses as well as to ensure that most

Australian businesses are not denied any input tax credits for making financial supplies

which are not part of their principal commercial activities.

15 March 2000

Contact Officer: Sean Malone

Indirect Tax and Payment Design Division

(02) 6263 4302