Edited version of private ruling

Authorisation Number: 1011617486491

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Ruling

Subject: GST and benefits cards.

Question 1:

Does the Commissioner agree that the provision of a benefit card is merely a means to distribute goods to staff?

Answer 1:

This particular question does not involve an aspect of GST law. However, the FBT ruling issued to you stated that it is 'considered that the provision of the card should be viewed as being merely the most convenient way of facilitating the provision of merchandise by the employer to the nominated employee'.

Question 2:

Is the provision of a benefit card to employees a voucher for the purposes of Division 100 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer 2:

No, the provision of a benefit card to employees is not a voucher for the purposes of Division 100 of the GST Act.

Question 3:

Is GST payable on the redemption of a benefit card?

Answer 3:

No, GST is not payable on the redemption of a benefit card.

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

You are the representative member of a GST group.

One of the entities within the group has introduced two new staff rewards and recognition schemes as follows:

§ Program A - an annual program for employees to reward and recognise outstanding achievements by employees within certain categories. A prize of a certain amount of certain goods sold in your stores is given to the winning employee.

§ Program B- an annual incentive program to reward and recognise employees on achieving sales targets. A prize of up to a certain amount of certain goods sold in your stores is given to the winning employee.

§ the goods available to employees under these rewards programs are all merchandise and groceries that are available for sale to the general public within your stores.

To facilitate the distribution of these goods to employees, you have introduced a card (the card) where employees receive the card to the value of the goods they are eligible to receive under the rewards program. The card was introduced for administrative purposes, as a practical method of distributing property to staff that would be eligible for these rewards and recognition.

You also sell regular gift cards to the public. However, you acknowledge that your gift cards are Division 100 vouchers for the purposes of the GST Act. The card is, however, not a gift card. Although it operates similar to a gift card, it has specific terms and conditions that differentiate it from a gift card and it is simply a means to reward employees with goods.

The specific terms and conditions of the benefit card are:

§ it is only available for use by current employees.

§ the purpose of the card is to facilitate a reward of goods to employees for their contribution to the business.

§ employees cannot purchase the card.

§ it can only be used by the recipient employee or an immediate family member of the employee. It cannot be used by any other person or sold or gifted.

§ to obtain goods, the employee or the immediate family member must present an identification card at the point of sale.

§ failure to comply with or abuse of the card may result in the loss of access to the rewards and recognition program and possible disciplinary action. Non-compliance or abuse at point of sale will result in cancellation of the card.

The card is merely the mechanism to facilitate the distribution of goods to employees. No other alternative for the distribution of goods is considered practical. As such, the card is not intended to function like a gift card. Gift cards can be purchased by any person, are fully transferable and can be used by any person who is in possession of the card, without any identification.

The Commissioner of Taxation has examined the provision of the card from a Fringe Benefits point of view and determined that the benefit provided to employees is not the card but the goods that the card facilitates a transfer of to the employee. Therefore, the benefit is a property benefit in accordance with section 40 of the Fringe Benefits Tax Assessment Act 1986.

Reasons for Decision

Question 1.

Does the Commissioner agree that the provision of a benefit card is merely a means to distribute goods to staff?

This particular question does not involve an aspect of GST law. However, the FBT ruling issued to you stated that it is 'considered that the provision of the card should be viewed as being merely the most convenient way of facilitating the provision of merchandise by the employer to the nominated employee'.

The Commissioner has reached this decision in an FBT context and as such it has not been reconsidered within this Ruling.

Question 2.

Is the provision of the benefits card to employees a voucher for the purposes of Division 100 of the GST Act?

Whether the card constitutes a voucher requires us to examine Division 100 of the GST Act.

The Commissioner's view of a voucher is encompassed in Goods and Services Tax Ruling 2003/5 Goods and Services Tax: Vouchers (GSTR 2003/5). Paragraph 16 of GSTR 2003/5 states:

16. To determine whether a voucher is one to which Division 100 applies, is a two step process. Firstly, the voucher must fall within the meaning of voucher in section 100-25. Comments on section 100-25 are found at paragraphs 20 to 54. Secondly, that voucher must satisfy the further requirements contained in section 100-5. Comments on section 100-5 are found at paragraphs 55 to 83F.

Following on from paragraph 16 of GSTR 2003/5 an article must first satisfy the meaning of 'voucher' in paragraph 100-25(1)(a) of the GST Act, which states:

A voucher is any:

(a) voucher, token, stamp, coupon or similar article

(b) . . .

the redemption of which in accordance with its terms entitles the holder to receive supplies in accordance with its terms. However, a postage stamp is not a voucher.

Further, paragraph 26 of GSTR 20038/5 states:

26. For a voucher to fall within subsection 100-25(1):

§ it must satisfy either paragraphs 100-25(1)(a) or (b);

§ the presentation of the voucher must be integral to supplies on redemption; and

§ upon redemption, the voucher must entitle the holder to receive supplies.

Your staff may receive the card to the value of the goods they are eligible to receive under the rewards and recognition programs, which they must present (along with their identification card) at the point of sale.

The above characteristics can be seen to satisfy the ordinary meaning of voucher as outlined in paragraph 26 of GSTR 2003/5, which states:

'Voucher' for the purposes of paragraph 100-25(1)(a)

26A. Under paragraph 100-25(1)(a) the definition of voucher includes a voucher, token, stamp, coupon or similar article. In determining whether an article is similar to a voucher, token, stamp or coupon its characteristics, function and purpose need to be taken into consideration.

26B. In the context of vouchers, tokens, stamps, coupons or similar articles, the right or entitlement to receive supplies must cease to exist on the exercise of that right or entitlement by redemption or on expiry. On cessation of the right, the voucher or any part of the voucher performs no other function nor does any other function continue to exist.

26C. As the GST Act does not define 'voucher', 'token', 'coupon', 'stamp' or 'article' these terms take their ordinary meaning.

26D. Some relevant dictionary definitions for voucher, token and coupon are listed in the table below:

Term	Macquarie Dictionary	The Australian Oxford Dictionary
voucher	"…2. a document, receipt, stamp, or the like, which proves the truth of a claimed expenditure. 3. a ticket used as a substitute for cash, as a gift voucher, luncheon voucher, etc."	"1 a document which can be exchanged for goods or services as a token of payment made or promised by the holder or another. 2 a document establishing the payment of money or the truth of accounts… "
Token	. . .
Coupon	. . .

27. These ordinary meanings share a common characteristic of referring to things that are exchangeable for goods or services. When they are redeemed, the right or entitlement to receive goods or services ceases to exist. These things have no further function, such as being able to be topped up.

It is therefore apparent that the card satisfies the requirement of subsection 100-25(1) of the GST Act.

However, it is also necessary for us to determine whether this voucher satisfied the further requirements contained in section 100-5 of the GST Act, which states:

(1) A supply of a *voucher is not a *taxable supply if:

(a) On redemption of the voucher, the holder of the voucher is entitled to supplies up to the *stated monetary value of the voucher; and

(b) The *consideration for the supply of the voucher does not exceed the stated monetary value of the voucher.

. . .

(3) This section has effect despite section 9-5 (which is about what are taxable supplies) and section 9-15 (which is about consideration).

GSTR 2003/5 explores the requirements of section 100-5, and states that the supply of the voucher must otherwise be a taxable supply.

A taxable supply is defined in section 9-5 of the GST Act, which states:

You make a taxable supply if:

(a) you make the supply for *consideration; and
(b) the supply is made in the course or furtherance of an *enterprise that you *carry on; and
(c) the supply is *connected with Australia; and
(d) you are *registered, or *required to be registered.

However, the supply is not a *taxable supply to the extent that it is *GST-free or *input taxed.

Paragraphs 9-5(b), (c) and (d) are clearly met, in that the supply of the card to your staff has been made in the course or furtherance of your enterprise, it is connected with Australia and you are registered. However, the first requirement (regarding consideration) is of relevance. You 'supplies' the card to the employees. Therefore, what needs to be determined here is whether the employees have provided any consideration to receive the card.

Your employees have not provided any monetary consideration for the card, but we need to examine whether they have provided any other consideration.

In this respect, reference is made to Goods and Services Tax Ruling GSTR 2001/3 Goods and services tax: GST and how it applies to supplies of fringe benefits (GSTR 2001/3). Paragraphs 18 to 20 state:

Consideration

18. One of the requirements for a supply to be a taxable supply is that 'you make the supply for *consideration'.

19. The services of an employee can be consideration for the supply of a fringe benefit to that employee.

20. Consideration for the supply of a fringe benefit may also take the form of a payment or contribution made by the recipient of the benefit. It is only this consideration that is taken into account in working out the amount of GST on the supply of a fringe benefit.

Therefore, to ascertain whether supplies of the card are made for consideration, it is necessary to determine whether the supply of the Card is a fringe benefit. Reference is made to previous advice issued to you by the Commissioner which concluded that the card was not a fringe benefit, but rather it is the supply of the goods and merchandise that was the fringe benefit.

Accordingly, at the time of supply of the card to the employees, the employees have not provided any payment (monetary or non-monetary) to earn the card. Therefore, it can be said that the card is not provided for consideration and as such the supply of the card is not a taxable supply. As mentioned earlier, in order for a voucher to be a Division 100 voucher, the supply of the voucher must otherwise be a taxable supply. Therefore, in this case because there is no consideration for the supply of the voucher, the supply of the voucher (that is the card) does not meet the requirements of a taxable supply - and therefore it cannot be a voucher for the purposes of Division 100 of the GST Act.

Question 3

Is GST payable on the redemption of the benefit card?

No, GST is not payable on the redemption of the benefit card because of the following reasons.

GST is payable on taxable supplies. Section 9-5 of the GST Act defines a taxable supply. We have already agreed that the provision of the Benefits Card is not a voucher for Division 100 purposes, but previous advice issued to you by the Commissioner in an FBT context has concluded the goods selected by the employee upon provision of the benefit card (and their store identification card) are the fringe benefit.

The provision of the goods to the employees is therefore a taxable supply, because section 9-5 of the GST Act is satisfied here. This is because, the consideration for the supply of the goods (which is the fringe benefit) is considered to be the employees services as explained in paragraph 19 of GSTR 2001/3.

The value of taxable supplies that are fringe benefits is explained in GSTR 2001/3 as follows:

Value of a fringe benefit supply

21. GST is 10% of the value of a taxable supply where value is 10/11 of the price (being the amount of consideration for a supply). However, subsection 9-75(3) states that the price of a supply of a fringe benefit is the amount of consideration in the form of the recipients payment or the recipients contribution. 'Recipients payment' and 'recipients contribution' are defined in the GST Act.

22. This means that, where you make a taxable supply of a fringe benefit, you are only liable for GST to the extent of the consideration payable on the supply in the form of a recipients payment or recipients contribution.

We have only reproduced the parts of section 9-75 that relate to the matter in question.

(1) The value of a *taxable supply is as follows:

Price   × 10
11

where:

price is the sum of:

(a) so far as the *consideration for the supply is consideration expressed as an amount of *money - the amount (without any discount for the amount of GST (if any) payable on the supply); and

(b)  . . .

Example:

You make a taxable supply by selling a car for $22,000 in the course of carrying on an enterprise.

The value of the supply is:

$22,000 x 10 = $20,000

11

The GST on the supply is therefore $2,000 (i.e. 10% of $20,000).

(2) . . .

(3)

(3) In working out under subsection (1) the value of a *taxable supply made in a *tax period, being a supply that is a *fringe benefit, the price is taken to be the sum of:

(a) to the extent that, apart from this subsection, paragraph (a) of the definition of price in subsection (1) would be applicable:

(i) if the fringe benefit is a car fringe benefit . . .

(ii) if the fringe benefit is a benefit other than a car fringe benefit - so much of the amount that would be worked out under that paragraph as represented the *recipients contribution made in that period; and

(b) . . .

As the employees have made no contribution to the fringe benefits (apart from their labour) then it follows that subparagraph 9-75(3)(a)(ii) of the GST Act applies; that is, the recipients contribution (of which there is none in this case) is the value of the taxable supply. As there is no recipients contribution with the redemption of the card, then there is no value of the taxable supply; hence no GST is payable upon redemption of the card.

Support for this view is also found in Goods and Services Tax Ruling 2002/3 Goods and services tax: Prizes (GSTR 2002/3) which discusses prizes as a fringe benefit as follows:

A prize as a fringe benefit

87. A non-monetary prize that is given to an employee may be a fringe benefit. A fringe benefit is defined for GST purposes in section 195-1. How GST applies to supplies of fringe benefits is explained in Goods and Services Tax Ruling GSTR 2001/3.

88. GSTR 2001/3 explains that a 'benefit' is widely defined to include any right (including property right), privilege, service or facility. The benefit can be provided to the employee or employee's associate, by their employer, an associate of their employer or a third party under an arrangement with their employer (or associate).

Consideration for supply of a prize that is a fringe benefit

89. Where a prize given to an employee is a fringe benefit, the participation of the employee, being the services provided in the capacity of employee, can be consideration for the supply of the prize.

90. GSTR 2001/3 explains that the services of an employee can be consideration for the supply of a fringe benefit to that employee. However, these services are not taken into account in determining the price of the supply of the fringe benefit for GST purposes.

91. This is because of a special rule in subsection 9-75(3), which applies to limit the price of the supply. Price, in this provision, is limited to the amount the employee contributes to the particular fringe benefit provided. GSTR 2001/3 explains the application of subsection 9-75(3).

Therefore, in this case, no GST is payable upon redemption of the card as the recipients (that is, the employees) do not make a 'recipients contribution' for the fringe benefits received (which is the goods that they receive on the redemption of the card).

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