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  • Free of charge transactions within mining operations

    For source of ATO view, refer to general application of the principles in GSTR 2006/9 - Goods and services tax: supplies

    Background

    A mining company may employ the services of a contractor to carry out work at a mine site. The contract between the mining company and the contractor will typically set out the type of services to be performed and the rate at which the contractor is to be paid.

    In order to carry out the contracted work, the contractor will, from time to time, need to use materials and equipment of incidental value supplied by the mining company such as mine site stationery, electricity for powering computers, safety equipment such as ear plugs and telecommunications equipment. Typically, these are goods and services that are difficult to value and are of a very low monetary value.

    Not a taxable supply

    Where the costs of supplying these materials and equipment by the mining company to the contractor are not detailed in any form in the contract and no value is ascribed to this type of supply, as no consideration is provided, the supply will not be a taxable supply for the purposes of section 9-5 of the GST Act.

    A taxable supply

    Where the cost of supplying incidental materials or equipment by the mining company to the contractor is detailed in any form in the contract, or a value is ascribed, or any contra invoice, back charge or separate charge is made, which reduces the contracted payment, the supply will be a taxable supply for the purposes of section 9-5 of the GST Act.

    Where goods and services, that are not of incidental value (difficult to value and of a very low monetary value), are supplied and are not mentioned in contracts, the normal rules will apply. These supplies will be treated as non-cash consideration transactions or barter exchanges. That is, they will be taxable supplies and will be valued in accordance with paragraph 9-75(1)(b) of the GST Act (market value).

      Last modified: 01 Sep 2015QC 16450