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  • Issue 11 – Vehicles provided for evaluation, product launches, raffles, etc

    The three examples (vehicles provided for evaluation, vehicles displayed at product launches, etc, and vehicles provided to a charitable or non-profit organisation for restricted use) in this issue are public rulings for the purposes of section 105-60 of Schedule 1 to the Taxation Administration Act 1953.

    11.a. When does a taxable supply occur?

    Under section 9-5 of the GST Act, a taxable supply occurs if, among other conditions, there is a supply for consideration. Consideration is defined in section 9-15 to include any payment, or any act or forbearance in connection with the supply of something. Therefore consideration is not limited to the payment of money. Under section 9-75, the value of a taxable supply, where the consideration is not expressed in an amount of money, is based on the GST-inclusive market value of the consideration.

    Therefore, where there is a supply and something is received from the recipient in return for the supply, a taxable supply takes place. The something in return may be a monetary payment, or for example, an evaluation report (an act) or an undertaking to display the vehicle (an act). There must be some outcome that flows back to the supplier.

    However, whether a taxable supply takes place will depend on the facts of the particular circumstance.

    The following examples demonstrate the application of the above principles:

    Vehicles provided for evaluation

    The supply of a vehicle to a motoring writer or dealer for evaluation and report back to the supplier - is a taxable supply because the motoring writer or dealer is required to prepare an evaluation.

    The supply of a vehicle to a motoring writer, where the motoring writer has no obligation to provide a report back to the supplier - is not a taxable supply as nothing is received in return by the supplier.

    The supply of a vehicle to a dealer, for the dealer's employees to become familiar with the vehicle - is not a taxable supply as nothing is received in return by the supplier.

    The supply of a vehicle to a potential customer to see if it suits the needs of the customer and there is no requirement to report to the supplier - is not a taxable supply as nothing is received in return by the supplier.

    Vehicles displayed at product launches etc

    Vehicles displayed at product launches etc - probably not a taxable supply. Usually the supplier rents space from the organiser and therefore the vehicle is not supplied to the organiser. Even if the space was provided at no charge, it is doubtful whether there is a supply.

    Vehicles displayed by non-profit body in connection with raffle - is a taxable supply as recipient has use of vehicle in order to promote the raffle and the supplier receives an advertising benefit from the recipient.

    Vehicles displayed under sponsorship arrangements - is a taxable supply as the recipient has use of the vehicle, either in promoting their event or the ability to use the vehicle for travel, and the supplier receives an advertising benefit from the recipient.

    Vehicles provided to a charitable or non-profit organisation for restricted use

    Supply of a vehicle to charitable or non-profit body for restricted use - is a taxable supply for the reason mentioned above.

    11.b. How is the value of the taxable supply calculated?

    For source of ATO view, refer to principles in GSTR 2001/6 - Goods and services tax: non-monetary consideration.

    Once it is established that there is a taxable supply, it is then necessary to determine the GST-inclusive market value of the consideration in order to calculate the GST payable. In the above examples, the consideration would be valued as follows:

    • Appraisal or evaluation - the appraisal or evaluation amount.
    • Advertising benefit - the amount you would have to pay to receive identical advertising.

    GST payable by the dealer is 1/11th of the market value (including GST) of the consideration received as consideration for the market value of the supply of the vehicle.

    GST payable by the recipient of the vehicle is 1/11th of the market value (including GST) of the use/supply of the vehicle received as consideration for the supply of the advertising.

      Last modified: 07 Jun 2012QC 16411