Edited version of your written advice

Authorisation Number: 1013041579929

Date of advice: 24 June 2016

Ruling

Subject: Goods and Services Tax (GST) and promotional offers

Question 1

Are you entitled to claim a decreasing adjustment, pursuant to Division 134 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), for the promotional offers you made to a third party consumer for goods sold through retail intermediaries?

Answer

You are entitled to claim a decreasing adjustment, pursuant to Division 134 of the GST Act, for the specific payment you made to a third party consumer by directly crediting their energy account with a monetary amount.

You are not entitled to claim a decreasing adjustment, pursuant to Division 134 of the GST Act, for the provision of an Eftpos gift card to a third party consumer.

Question 2

Is the decreasing adjustment attributable to the first tax period in which you hold a valid third party adjustment note?

Answer

Yes, the decreasing adjustment is attributable to the first tax period that you hold a valid third party adjustment note.

This ruling applies for the following periods:

1 July 20XX to 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You are registered for GST.

You supply goods to retail intermediaries for resale to end consumers.

You remit GST of 1/11^th of the consideration received from the retail intermediaries and the retail intermediaries then claim input tax credits of 1/11^th of the prices they paid to you.

When the retail intermediaries sell the goods to the end consumers they remit GST of 1/11^th of the consideration they received from the end consumers.

During the relevant financial years, you had various promotional activities with retail intermediaries relating to the resale of particular goods to end consumers.

These are the conditions for your promotional activities:

1) The promotion is only open to individual Australian residents aged 18 years or over. Purchases for businesses are not eligible. Purchases made on behalf of not-for-profit organisations, charities, charitable institutions, government departments or similar organisations are also not eligible.

2) An individual end consumer must purchase and pay in full for an eligible product from an authorised participating dealer during the promotional period.

3) Each eligible product will qualify for an Eftpos card value or an energy rebate of a certain amount.

4) Stock in each participating dealer is subject to availability and it is the responsibility of the purchaser to check stock availability with the authorised participating dealer.

5) The end consumer must visit your website and follow the prompts to register their purchase online and fully complete the promotional claim form providing details including:

• Name

• Address

• Contact number

• Email address

• Information of the goods purchased and receipt/invoice number

• Choice of Eftpos gift card or energy rebate

• If select energy rebate then must provide details of provider and details of account

6) The end consumer must print off their online claim form, record the unique claim number and mail the online claim form along with a copy of their purchase receipt/invoice and, if select the energy rebate, a copy of their most recent bill.

7) The claim form must be received by you via mail within X calendar days from the date the qualifying purchase was made.

8) There is a limit on the number of claims allowed per household. This varies per financial year.

9) Successful claimants will be notified via email.

10) For each valid claim, you will either award an Eftpos gift card or credit the claimant's account depending on the claimant's selected preference.

11) The rebate amount corresponding with the product that was purchased by the claimant will be credited to the claimant's account provided by the claimant. The rebate cannot be taken as cash or merchandise.

12) The Eftpos gift card, with the corresponding value depending on the product purchased, will be mailed out to the claimant's address stated in the claim form.

13) The Eftpos gift card may be used to purchase goods or services at retailers in Australia with eftpos facilities who accept the card, when the gift card has enough unused value to make the purchase. Some retailers may choose not to accept the gift card.

14) Prior to using the Eftpos gift card, the claimant must activate the Eftpos gift card in accordance with the instructions provided within certain months from the date of issue. Once activated the gift card is valid for certain months from the date of activation.

15) The Eftpos gift card cannot be redeemed for cash, reloaded, returned for a refund, have its balance consolidated to a new gift card or be replaced after expiry. If the claimant does not use the Eftpos gift card by the stipulated timeframe then the gift will be forfeited.

16) The Eftpos gift card is not transferable or exchangeable and cannot be taken as cash.

17) The Eftpos gift card is not legal tender, account card, credit or debit card or securities. It is the claimant's responsibilities to keep the gift card secure.

18) By entering into this promotional activity, the end consumers agree to the terms and conditions set out by you on your website. You reserve the right to vary or replace these conditions from time to time.

You have lodged a notification of entitlement to a GST refund or credit from the tax period commencing 1 September 20XX, pursuant to section 105-55 of Schedule 1 of the Taxation Administration Act 1952 (TAA).

The Tax Office issued a letter to you acknowledging receipt of your notification of entitlement to a GST refund or credit for the monthly tax periods 1 September 20XX to 30 June 20XX, and confirming that for these tax periods the notification was made within the four year time limit in section 105-55 of Schedule 1 to the TAA. The letter also highlighted that this acknowledgement does not confirm your entitlement to a credit or a refund.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 section 9-5

A New Tax System (Goods and Services Tax) Act 1999 subsection 134-5(1)

A New Tax System (Goods and Services Tax) Act 1999 paragraph 134-5(1)(a)

A New Tax System (Goods and Services Tax) Act 1999 paragraph 134-5(1)(b)

A New Tax System (Goods and Services Tax) Act 1999 paragraph 134-5(1)(c)

A New Tax System (Goods and Services Tax) Act 1999 paragraph 134-5(1)(d)

A New Tax System (Goods and Services Tax) Act 1999 paragraph 134-5(1)(e)

A New Tax System (Goods and Services Tax) Act 1999 section 134-15

A New Tax System (Goods and Services Tax) Act 1999 section 134-20

A New Tax System (Goods and Services Tax) Act 1999 Division 134

A New Tax System (Goods and Services Tax) Act 1999 section 195

Taxation Administration Act 1952 section 105-55 of Schedule 1

Reasons for decision

Decreasing adjustments for third party payments

Under Division 134 of the GST Act a decreasing adjustment may arise if you make a payment to an entity that acquires something that you had supplied to another entity.

Subsection 134-5(1) of the GST Act states that:

You have a decreasing adjustment if:

(a) you make a payment to an entity (the payee ) that acquires a thing that you supplied to another entity (whether or not that other entity supplies the thing to the payee); and

(b) your supply of the thing to the other entity:

(i) was a * taxable supply; or

(ii) would have been a taxable supply but for a reason to which subsection (3) applies; and

c) the payment is in one or more of the following forms:

(i) a payment of money;

(ii) an offset of an amount of money that the payee owes to you;

(iii) a crediting of an amount of money to an account that the payee holds; and

(d) the payment is made in connection with, in response to or for the inducement of the payee's acquisition of the thing; and

(e) the payment is not * consideration for a supply to you.

If your provision of an Eftpos gift card or a rebate to an end consumer meets all of the requirements of subsection 134-5(1) of the GST Act then you would have a decreasing adjustment.

In this case, by providing an Eftpos gift card or a rebate to the successful claimant you are making some sort of payment to an entity (the successful claimant) who acquired a thing that you supplied to another entity (the retail intermediary). Thus, paragraph 134-5(1)(a) is satisfied.

Your supply of the product to the retail intermediary is a taxable supply as the requirements of a taxable supply under section 9-5 of the GST Act are met. Hence, paragraph 134-5(1)(b) is satisfied.

Your provision of an Eftpos gift card or a rebate is made in connection with, in response to or for the inducement of the claimant's acquisition of the product. Thus, paragraph 134-5(1)(d) is satisfied.

There are certain steps and conditions that the end consumer must fulfil in order to be successful in claiming an Eftpos gift card or a rebate. However, the successful claimant is not required provide you with anything or do or refrained from doing anything. Therefore, your provision of an Eftpos gift card or a rebate is not consideration for a supply to you. This means paragraph 134-5(1)(e) is satisfied.

If your provision of an Eftpos gift card or a rebate is a payment of money, an offset of an amount that the payee owes you or a crediting of an amount of money to an account that the payee holds, then paragraph 134-5(1)(c) would be satisfied which warrants a decreasing adjustment pursuant to subsection 134-5(1) of the GST.

Provision of an Eftpos gift card

Payment of money

Section 195-1 of the GST Act defines money to include:

(a) currency (whether of Australia or of any other country); and

(b) promissory notes and bills of exchange; and

(c) any negotiable instrument used or circulated, or intended for use or circulation, as currency (whether of Australia or of any other country); and

(d) postal notes and money orders; and

(e) whatever is supplied as payment by way of:

(i) credit card or debit card; or

(ii) crediting or debiting an account; or

(iii) creation or transfer of a debt.

An Eftpos gift card does not come under any of the paragraphs (a), (b), (d) or (e) in the definition of money above.

As for paragraph (c) above, paragraph 77 of the Goods and Services Tax Ruling GSTR 2014/3 Goods and services tax: the GST implications of transactions involving bitcoin refers to the ordinary English meaning of 'negotiable instrument' as:

A document recording a chose in action (such as a promise to pay money by one person to another, or a direction by one person to another to pay money to a third person), with the following characteristics: the ability to transfer the property rights recorded on the document by delivery, or by signature (indorsement) and delivery, of the document itself (unless the document, being a bill, is marked non-transferable) and without immediate notice of the transfer to the person against whom the rights are to be enforced - an instrument so transferred is said to be 'negotiated'

Your terms and conditions state that the Eftpos gift card:

• may be used for purchases of goods or services at retailers in Australia with eftpos facilities who accept the card;

• cannot be redeemed for cash, reloaded, returned for a refund, have its balance consolidated to a new gift card or be replaced after expiry;

• is not transferable or exchangeable and cannot be taken as cash; and

• is not legal tender, account card, credit or debit card or securities.

Furthermore, where the gift card is not activated or used by your stipulated timeframe then the gift is forfeited. Therefore, the Eftpos gift card is not a negotiable instrument. Based on the terms and conditions, we do not consider that your provision of an Eftpos gift card is a payment of money.

An offset of an amount that the payee owes you or a crediting of an amount of money to an account that the payee holds

It is also not an offset of an amount that the successful claimant (payee) owes you or a crediting of an amount of money to an account that the successful claimant (payee) holds.

This means your provision of an Eftpos gift card does not meet paragraph 134-5(1)(c) and as a result you do not have a decreasing adjustment pursuant to subsection 134-5(1) of the GST Act where you provide an Eftpos gift card to the successful claimant.

Provision of a specified rebate

Although your terms and conditions provide that the rebate cannot be taken as cash or merchandise, you are actually crediting the successful claimant's account with an amount of money. Hence, your provision of a rebate in this circumstance satisfies paragraph 134-5(1)(c) of the GST Act. This means your provision of a rebate, by crediting successful claimant's account with an amount of money, warrants a decreasing adjustment according to subsection 134-5(1) of the GST Act.

Attribution of decreasing adjustments

Section 134-15 of the GST Act provides that if you have a decreasing adjustment under section 134-5 then the adjustment (or part) is attributable to the first tax period for lodging a GST return when you hold a third party adjustment note.

This means that in order to claim a decreasing adjustment for your provision of a rebate, you must attribute the adjustment to the first tax period in which you hold a valid third party adjustment note.

Information about a valid third party adjustment note and when to provide it to the third party is outlined in section 134-20 of the GST Act and the A New Tax System (Goods and Services tax) Third Party Adjustment Note Information Requirements Determination (No. 1) 2010.

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