Industry incentive payments for greeting card retailers
This fact sheet does not address the GST treatment of volume incentives, discounts and rebates you receive from greeting card manufacturers and wholesalers. For more information, refer to Taxation treatment of rebates, incentives and other allowances received by greeting card retailers.
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An incentive payment is any monetary or non-monetary payment you receive from a greeting card supplier in return for either:
- entering into an agreement to use them as your greeting card supplier
- renewing your current agreement with them as your greeting card supplier.
Non-monetary incentives can be provided in various forms, such as stock or fixtures for no charge instead of, or in addition to, money.
Agreements of this nature are known as incentive agreements. They are usually for a specified period and can be made verbally or in writing.
If you receive a monetary or non-monetary incentive to enter into an agreement with a card supplier, under GST law you have received a payment in return for a taxable supply.
Monetary and non-monetary incentives may be described in incentive agreements as transitional allowances, marketing allowances, special allowances or competitive payment allowances.
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Josh operates a GST-registered newsagency called City News. In May 2006, Josh is approached by Cards Wholesalers Pty Ltd who offers him an incentive to sell their cards for 12 months. Josh enters into the agreement and receives a monetary incentive of $2,000 and a non-monetary incentive of one month's supply of free stock.
Under GST law Josh has received a payment in return for a taxable supply.
Josh must account for the monetary and non-monetary component of the taxable supply.
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What is the GST treatment of an incentive payment?
If you receive an incentive payment in return for a taxable supply, you must:
- account for the GST included in the price of the supply you make
- issue a tax invoice for the supply if the price of the supply is more than $82.50 (including GST)
- report the GST included in the price of the supply on your activity statement.
The price of the taxable supply you make is the amount of the monetary incentive and/or the value of the non-monetary incentive you receive (including GST).
How do I work out the value of a non-monetary incentive?
If you receive a non-monetary incentive, you need to work out its market value, including GST. You need to determine this value using a reasonable method.
Examples of reasonable methods include:
- the market value of an identical good, service or thing
- the market value of a similar good, service or thing
- the market value of the supply
- a professional appraisal.
What if I refund or return the incentive payment?
If you reported the GST included in the price of the supply you made on your activity statement, you will need to make an adjustment on your next activity statement if you either:
- refund the monetary incentive you received (in full or in part)
- return the non-monetary incentive you received because you did not comply with the terms of the agreement.
Find out more
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Abstract: Explains the GST treatment of incentives you receive from greeting card manufacturers and wholesalers.