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  • Issue 9 Deposits

    9.1 Division 99 of the GST Act deals with deposits

    Under this provision, if funds are placed with a third party stakeholder "held as security for the performance of an obligation", the amount should not be treated as consideration until the funds are applied.

    Retentions can be required to be placed into an interest bearing account for both parties until certain obligations under the contract have been met. Even though the transaction may be described as a retention, will it be treated for all practical purposes as a security deposit under Division 99?

    The answer to this question will be determined by the nature of any contracts entered into by the parties. (Please refer to GSTD 2000/1 - Goods and Services Tax: is the scope of Division 99 of the A New Tax System (Goods and Services Tax) Act 1999 limited to holding deposits?External Link for further information). Division 99 of the GST Act applies to any deposit that is subject to forfeiture on failure to perform an obligation under an agreement.

      Last modified: 22 May 2014QC 28063