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  • How GST applies to rebates

    The way you apply GST to rebates depends on the circumstances. A rebate can give rise to:

    Adjustment event

    When a rebate reduces the price of the goods and services that you sell or purchase, an adjustment event occurs.

    Examples of rebates that reduce the price of goods or services include:

    • volume rebates and deferred credits (rebates suppliers pay to purchasers who reach certain levels of purchases)
    • settlement or trade discounts that purchasers receive for early payments after a sale.

    In this situation you may have to make an adjustment to the amount of GST you paid or claimed.

    Third party payment adjustments

    A third party adjustment occurs when you, as a supplier, make a payment to an entity that acquires something that you supplied to another entity.

    Examples of third party payments include:

    • motor vehicle industry holdback payments
    • manufacturer cash back incentives to retail customers to boost sales of their products via a retailer.

    In this situation you may have to make an adjustment to the amount of GST you paid or claimed.

    Payment for a separate sale

    If you are a supplier, a rebate is payment for a separate sale when you pay it to reward, reimburse, compensate or subsidise a purchaser (of your goods and services) for activities they conduct for you or on your behalf. These rebates do not reduce the price of the goods and services you sold to them, but are payment for a separate sale by the purchaser to you.

    If you are a purchaser, and receive a rebate from your supplier for activities that you conduct for them or on their behalf, the rebate is a payment for the sale of your services. The rebate does not reduce the price of the goods and services you purchased from the supplier.

    Activities may include:

    • advertising, promotions, warehousing, distribution or other marketing activities
    • accounting, bookkeeping or debt collection.

    It can also include using the purchaser's premises or equipment for these activities.

    Some common examples of promotional rebates include:

    • cooperative rebates
    • cooperative allowances
    • cooperative payments
    • advertising rebates
    • advertising allowances.

    In this situation you need to treat the rebate as payment for a separate sale.

    Your intention

    You must consider your intention when working out whether a rebate you pay or receive:

    • reduces the price of the goods and services sold or purchased
    • is payment for a separate sale.

    You can work out your intention by considering written evidence showing your obligations and expectations, and your actions in relation to the rebate.

    Written evidence may include:

    • contracts of sale
    • documentation of the terms of trade
    • promotional plans
    • reports about conducting or monitoring the activities
    • minutes of meetings between the parties
    • calculations and invoices
    • claim forms or credit notes.

    Actions may include:

    • whether other rebates are paid
    • actual activities conducted
    • the supplier's influence on the purchaser's activities
    • accounting treatment of the rebate.

    Next steps:

      Last modified: 10 Apr 2017QC 16694