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Edited version of private ruling
Authorisation Number: 1011668201568
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Ruling
Subject: GST and sale of bus tickets
Question: What amount should you include from the sale of bus tickets in the calculation of your GST turnover?
Answer: The amount you include in the calculation of your GST turnover is 10/11th of the sale price of the bus tickets. In your example, this would be 10/11th of $2.00.
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 a sole trader.
· You have an ABN but are not registered for the goods and services tax (GST).
· You sell bus tickets (tickets)
· The bus tickets are supplied to you by another entity.
· The conditions governing the sale of the tickets are set out in a seller's agreement between you and the other entity.
· You are required to pay an amount to the other entity for each ticket.
· You are required to sell the tickets to travellers at a designated price which is set by the other entity, depending on the type of ticket.
· This designated price includes a particular margin which represents your profit from selling tickets.
· You have provided the following example to explain how the ticket pricing works:
o other entity sells a ticket to you for $1.80
o You sell the ticket to a traveller at a price of $2.00
· Under the agreement the tickets delivered to you by the other entity shall remain their property and you are in possession of the tickets as bailee until such time as the tickets are sold or payment of the invoiced amount is made, whichever occurs first.
Reasons for decision
While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our decision.
Under sections 188-15 and 188-20 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) your GST turnover is the sum of the values of all the supplies that you have made during a 12 month period, ending in a particular month, or commencing in a particular month. Therefore, what needs to be determined first is whether you have supplied the bus tickets to the traveller. If it is established that you haven't supplied the tickets to the traveller then it is necessary to determine what is that you have supplied and also the amount that needs to be included in the GST turnover in regards to the bus tickets.
In accordance with the terms of the agreement, the tickets are the legal property of the other entity until the re-seller (you) pay the invoiced amount or sell the tickets to a traveller whichever occurs first. This means that at the time of selling the tickets to a traveller, you are the owner of the tickets. Consequently, you make a supply of the tickets to the traveller. We are of the view that you are not selling the tickets as an agent of the other entity.
What needs to be determined next is the amount that needs to be included in the calculation of your GST turnover. As mentioned earlier, pursuant to sections 188-15 and 188-20 of the GST Act, your GST turnover is the sum of the values of the supplies.
The 'value' of a supply is determined using the formula set out in section 9-75 of the GST Act. The formula is:
Value = price x 10/11
Because you are the legal owner of the tickets at the time you make a sale to a traveller, we are of the opinion, that you are entitled to the full amount of the consideration on the sale of the tickets. In your example this would be the $2.00, and therefore, the price of each ticket you supply to a traveller is $2.00. Accordingly, in your example the value of the supply of each ticket is 10/11th of $2.00. This is the amount that you are required to include in the calculation of your GST turnover.
The $1.80 that you pay the other entity is your price to acquire each ticket.
Additional Information:
If, after calculating your annual turnover, you choose, or are required, to be registered for GST, you will be liable to pay GST on any taxable supplies you make.
A taxable supply is a supply that is made by an entity, for consideration, in the course of an enterprise that they carry on, the supply is connected with Australia and the entity is registered or required to be registered for GST. The supply is not a taxable supply, if it is GST-free or input taxed. Accordingly, the sale of tickets will be a taxable supply as the sale of a ticket meets all of the requirements of a taxable supply.
GST payable on a taxable supply is 1/11th of the price of a taxable supply.
In your example you receive consideration of $2.00 for each ticket you supply. This is the price of the taxable supply of a ticket. Therefore, your GST liability will be 1/11th of this amount. You will also be entitled to claim an input tax credit for any GST included in the consideration paid for the acquisition of the tickets from the other entity, which in your example is 1/11th of $1.80 per ticket.