• 8.8. If you are a supplier accounting for GST on a cash basis and you sell a debt to a debt factor, whether on a recourse or non-recourse basis, when do you account for the GST on the taxable supply to which the debt relates? How much GST should you account for?

    For source of ATO view, refer to paragraphs 44 and 56 of GSTR 2004/4External Link - Goods and services tax: assignment of payment streams including under a typical securitisation arrangement.

    You account for the GST on the taxable supply under the normal attribution rules. That is, you attribute the GST for the taxable supply when the recipient of the taxable supply makes any payment to the debt factor. The amount you must account for is 1/11th of the total consideration received by the debt factor from the recipient.

    The GST payable for the taxable supply you make to the recipient is not equal to 1/11th of the consideration received by you for the supply of the debt to the debt factor.

    Note that in some cases, you might not assign all of the right, title and interest in your debt to the debt factor. For example, you might assign 90% of the debt to the debt factor, with the recipient still being liable to you for 10% of the original debt. In these cases, you must account for 1/11th of the total consideration provided by the recipient to both the debt factor and to yourself.

    Example

    A makes a taxable supply of goods to B for $110. A then sells the debt (owed to him by B in relation to the taxable supply) to a debt factor for $95. B later pays the debt factor $99.

    But for the factoring arrangement, A would ordinarily account for $9 GST when A receives the $99 from B. This outcome does not change because of the factoring arrangement. A accounts for $9 GST when B makes the $99 payment to the debt factor.

    A does not account for 1/11th of the $95 payment received from the debt factor. This payment is consideration for a financial supply made by A (being the supply of the debt to the debt factor).

    End of example
      Last modified: 24 Jun 2015QC 16359