Rebates and GST

You need to know about:

What a rebate is

A rebate is an incentive that you offer as a supplier, or receive as a purchaser in many different circumstances.

A rebate can also be called a:

  • trade incentive payment
  • trade discount
  • trade price rebate
  • volume rebate
  • promotional rebate
  • incentive rebate
  • cooperative advertising allowance
  • case deal
  • deferred credit
  • third party payment.

How to apply your rebate

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

The way you account for GST will be different in each of these situations.

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GST definitions – payment, sales

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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.

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GST definitions – purchase

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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.

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.

See Example – Accounting for GST on a rebate.

    Last modified: 22 May 2014QC 16694