ATO Interpretative Decision
ATO ID 2004/180
Goods and Services Tax
GST and attribution of GST where a 'core deposit' forms part of the considerationFOI status: may be released
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This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
Under subsection 29-5(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), does the entity, a supplier of reconditioned motor vehicle parts, attribute 1/11th of the price of its supply of a reconditioned part to the tax period in which it issues an invoice for the supply where the price of the supply includes an amount called a 'core deposit'?
Decision
Yes, under subsection 29-5(1) of the GST Act the entity does attribute 1/11th of the price of its supply of a reconditioned motor vehicle part to the tax period in which it issues an invoice for the supply where the price of the supply includes an amount called a 'core deposit'.
Facts
The entity is a supplier of reconditioned motor vehicle parts. The entity supplies a reconditioned part to a customer to replace the customer's broken motor vehicle part. This supply is a taxable supply under section 9-5 of the GST Act. The price of the supply includes an amount called a 'core deposit'.
This 'core deposit' is an amount that the entity will repay to the customer if the customer supplies the entity with their used motor vehicle part. If the customer does not supply their used part to the entity, the entity retains the core deposit. The customer is under no obligation to supply their used part to the entity.
The entity accounts for goods and services tax (GST) on a non-cash basis. When it supplies the reconditioned motor vehicle part, it issues its customer with an invoice that shows the full price for the supply. The amount of the 'core deposit' is identified separately on the invoice but is included in the full price.
Reasons for Decision
Under subsection 29-5(1) of the GST Act, if an entity accounts for GST on a non-cash basis the GST payable on a taxable supply is attributed to the tax period in which one of the following occurs:
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- any of the consideration is received for the supply, or
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- if, before any of the consideration is received, an invoice is issued relating to the supply - the tax period in which the invoice is issued.
The entity has issued an invoice. Therefore, the entity is required to attribute the GST payable in that tax period. However, as the price includes a 'core deposit' it needs to be determined how much GST the entity is required to attribute.
Subsection 99-5(1) of the GST Act provides that a deposit held as security for the performance of an obligation is not treated as consideration for a supply unless the deposit:
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- is forfeited because of a failure to perform the obligation, or
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- is applied as all or part of the consideration for a supply.
Therefore, a deposit held as security for the performance of an obligation is not treated as consideration at the time of receipt and does not form part of the consideration for a supply for the purposes of attributing GST payable on that supply. The deposit only becomes consideration at the time it is forfeited or is applied as all or part of the consideration for a supply.
Subsection 99-5(1) of the GST Act requires that the deposit be 'a deposit held as security for the performance of an obligation'. It is not sufficient that an amount is merely regarded as a deposit.
The entity's customer is not obliged to supply the entity with their used motor vehicle part. The 'core deposit' is an inducement for the customer to supply the entity with their used motor vehicle part rather than an amount held as security for the performance of an obligation. Therefore, the 'core deposit' is not a deposit held as security for an obligation and Division 99 of the GST Act does not apply. The 'core deposit' is part of the consideration for the supply of the reconditioned motor vehicle part. Accordingly, the basic attribution rules in Division 29 of the GST Act apply.
Therefore, under subsection 29-5(1) of the GST Act the entity attributes 1/11th of the price of its supply of a reconditioned motor vehicle part to the tax period in which it issues an invoice for the supply where the price of the supply includes an amount called a 'core deposit'.
Date of decision: 23 December 2002
Legislative References:
A New Tax System (Goods and Services Tax) Act 1999
section 9-5
Division 29
section 29-5
subsection 29-5(1)
Division 99
subsection 99-5(1)
ATO ID 2004/184
Keywords
Goods and services tax
GST tax periods
Attribution rules
Non cash basis
GST supplies & acquisitions
GST consideration
Taxable supply
ISSN: 1445-2782
| Date: | Version: | |
| You are here | 23 December 2002 | Original statement |
| 16 December 2005 | Archived |