Issue 5 - Deposits
5.a. Does the payment of a deposit which is subject to forfeiture trigger a GST liability?
For source of ATO view, refer to principles in GSTR 2006/2External Link - Goods and services tax: deposits held as security for the performance of an obligation.
Division 99 of the GST Act applies to any deposit that is subject to forfeiture by the recipient, on failure to perform an obligation under an agreement for a supply.
The effect of this division is that GST does not become payable when a deposit, which is subject to forfeiture, is received.
GST becomes payable in the tax period in which:
- the deposit is forfeited by the recipient for failure to perform an obligation under the agreement, or
- the deposit is applied as part or all of the consideration for a supply.