Potential GST refund on broker fees
Have you traded shares on an overseas stock exchange? We could have some good news for you.
The Australian Taxation Office has released a draft determination (GSTD 2014/D4) confirming that GST is not chargeable on broker fees charged to facilitate a trade of financial products on an overseas securities or futures exchange (i.e. the brokerage charged is GST free). The most common financial products traded would be share equities.
Basically, this means you could be eligible to receive a refund on the GST you paid on commissions charged for broker services when buying or selling financial products on overseas securities or futures exchanges. The refund will be particularly relevant for super funds and people who engage a local broker to execute share trades internationally.
Because the ATO's determination is a draft, it will not be finalised until 28 November 2014. If it is finalised without changes, then we expect the ATO will agree to refunds where certain conditions are satisfied.
Also, you should be aware that there will be a time limit on claiming refunds. Anyone that thinks they may be eligible should start reviewing their transactions and any potential refunds now to ensure they do not miss any opportunities from the past four years of transactions.
Even if you have already claimed back 75% of the GST charged on the brokerage under a Reduced Input Tax Credit, there is now an ability to obtain a refund on the entire GST charged - effectively recovering the remaining 25% of GST. You will need to work with the brokers who charged the GST to obtain the refunds and there may be some Business Activity Statement administrative issues, but we can assist in this process.
The principles outlined in the draft determination also have implications for claiming GST credits where businesses are selling or buying shares in an overseas business as part of an overall corporate transaction and GST is being included in charges associated with the execution of the transaction.
For further information or to discuss how your transactions might be affected, don't hesitate to contact Ian Matthews or any of our Taxation experts around Australia.