Specific questions and answers

Question 1. Vouchers are often provided for individuals and families who are in need of emergency assistance. Does the introduction of the GST mean that these vouchers will buy 10% less on some items? Is it better for the charity to purchase the items rather than give vouchers even though there will be an extra cost in areas such as storage, transport and administrative arrangements.


The introduction of the GST may mean that a voucher will purchase less of some items. Many items will be cheaper after the GST has commenced. Charities will be able to claim input tax credits for the purchase of items as well as the costs associated with the storage, transport and administrative arrangements.

Question 2. When a charity pays for electricity, phone bills and other things for people are they entitled to input tax credits for GST charged on the supplies? 

Non-interpretative – straight application of the law

When a charity pays a bill on behalf of a person in need, the charity is paying the account as a 'third party' and is not making an acquisition of anything. As the supply of the electricity or telephone service is made to the person and not to the charity, the charity is not entitled to an input tax credit.

Similarly, a charity is not entitled to an input tax credit where it purchases a voucher (with a stated money value) from a retailer and gives the voucher to someone for them to purchase goods or services. GST is not payable when the voucher is purchased and any taxable supply of goods or services on redemption of the voucher is made to the person using the voucher and not to the charity. If the charity gives the person cash as an alternative to a voucher any goods or services purchased by the person with the cash are also supplied to the person and not to the charity.

The case is different if a charity has an agreement with a retailer that requires the retailer to provide certain individuals with goods or services upon presentation by the individuals to the retailer of an appropriate authority from the charity. After provision of the goods (or services) to the individuals, the retailer sends the authority and the tax invoice to the charity for payment. Under the agreement the supply of the goods (or services) is made to the charity even though the agreement requires the goods (or services) to be provided to the individuals. As the charity makes an acquisition of the goods (or services) it will be entitled to an input tax credit for any GST payable on those goods (or services).


If the agreement between the charity and the retailer merely states that the charity will pay for some or all of the supply by the retailer to the individual, this is an example of a payment as a 'third party'. The charity would not make an acquisition of anything and would not be entitled to an input tax credit.

The issue of third party payments is covered in some detail in GST Ruling Supplies GSTR 2006/9External Link.

End of attention
    Last modified: 18 Nov 2013QC 27139