GST on brokerage of foreign shares listed overseas
Recently in an ATO interpretive decision ID 2012/1 the ATO considered whether GST would be payable on Australian brokerage fees, if the shares purchased were listed on a foreign exchange.
It was the ATO's opinion that the brokerage would be "GST-free under paragraph (a) of item 4 in the table in subsection 38-190(1) of the GST Act, as the services are in relation to rights and the rights are for use outside of Australia." As the rights (e.g. rights to dividends, distribution of assets on wind-up, voting) are linked with the share, the brokerage on the share is considered GST free.
In Travelex Ltd v. Commissioner of Taxation (Travelex ), an appelant was supplied foreign currency at an airport terminal on the way to Fiji. This was held to be a 'supply of rights' as it was clear that the currency was to be used overseas. The ATO ID has used this case to support their decision. Although the brokerage fee is generated within Australia, the purpose of the brokerage is to purchase rights held in an overseas jurisdiction.
Sally, a local Ashwood business owner, had a large tax refund and decided to invest the money in shares. She engaged a stockbroking firm to purchase shares in Apple, listed on the New York Stock Exchange. Sally will pay brokerage on the transaction however she should not be charged GST.
Contact Hillyer Riches Melbourne Tax Accountants today for further assistance.
This article is for general information only and should not be relied upon without first seeking advice from an appropriately qualified professional.