ATO Interpretative Decision
ATO ID 2002/1062 (Withdrawn)
Goods and Services Tax
GST and restaurant tipsFOI status: may be released
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The ATO view on this issue is covered in Media Release - GST and restaurant tips: Tax Office clarifies treatment (NAT 2000/18).This document incorporates revisions made since original publication. View its history and amending notices, if applicable.
Status of this decision: Decision Withdrawn 11 November 2005
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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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
Does a tip paid voluntarily by a customer form part of the consideration, as defined in section 9-15 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), for the supply by the entity, a restaurant operator, to the customer?
Decision
No, a tip paid voluntarily by a customer does not form part of the consideration, as defined in section 9-15 of the GST Act, for the supply by the entity, a restaurant operator, to the customer.
Facts
The entity is a restaurant operator. A customer who dines at the entity's restaurant provides a tip in addition to the payment for their meal. The tip is purely voluntary, is intended for the restaurant employees that provided the service and is paid by way of cash or credit card. The entity passes on the tip to the employees.
The entity is registered for goods and services tax (GST) and its supply to the customer is a taxable supply under section 9-5 of the GST Act.
Reasons for Decision
Under section 9-15 of the GST Act, consideration includes any payment, act or forbearance, in connection with, in response to or for the inducement of a supply of anything.
For a tip to be consideration for the entity's supply from its restaurant, it must be in connection with, in response to or for the inducement of the supply made by the entity from its restaurant. Generally, a genuine tip that is paid on a purely voluntary basis by a customer and that is intended to go to the employee/s that provided the service, is not a payment to the restaurant but is a payment to the employee. As such, a genuine tip is not consideration for a supply by a restaurant to its customers.
The tip is paid by the customer on a purely voluntary basis and is intended for the restaurant employees that provided the service. Further, the entity passes on the tip to the employees. Therefore, the tip does not form part of the consideration, for the supply by the entity to the customer.
Legislative References:
A New Tax System (Goods and Services Tax) Act 1999
section 9-5
section 9-15
Other References:
Media release, Nat 2000/18
Keywords
Goods and services tax
GST supplies and acquisitions
GST consideration
ISSN: 1445-2782
| Date: | Version: | |
| 15 April 2002 | Original statement | |
| You are here → | 11 November 2005 | Archived |