Edited version of private ruling

Authorisation Number: 1011672058900

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Ruling

Subject: Supply of mobile phone bundled with prepaid phone card

Questions

1. Is the supply of a mobile phone bundle which contains a mobile phone handset and phone credit facility a mixed supply for GST purposes?

2. Should GST on the supply of the $XX mobile phone bundle be accounted based on the consideration received for the mobile phone bundle less the value of the phone credit facility?

Answers

1. Yes, the supply of a mobile phone bundle is a mixed supply for GST purposes.

2. Yes, the GST payable on the supply of the $XX mobile phone bundle will be accounted based on the consideration received for the mobile phone bundle less the value of the phone credit facility.

Relevant facts

You carry on a business that is registered for GST. You sell mobile phone starter kits.

Lately, you have sold a mobile phone bundle for $XX. The bundle is equipped with a mobile phone and $YY of phone credit.

Reasons for decisions

Question 1

The goods and services tax (GST) is structured around the concept of supply. It is the character of the supply that determines its GST treatment. Therefore to determine how GST applies to a transaction, it is necessary to analyse the character of the supply.

Goods and Services Tax Ruling GSTR 2001/8 (available at www.ato.gov.au) provides guidance on when a supply is a mixed supply and when a supply is a composite supply.

GSTR 2001/8 explains that a mixed supply is a supply of separately identifiable taxable and non taxable parts that need to be individually recognised. A mixed supply is treated as more than one supply, with the correct GST treatment being applied to each of the individual parts.

According to paragraph 19 of GSTR 2001/8, where a transaction comprises a bundle of features and acts, you must consider all of the circumstances of the transaction to ascertain its essential character. You also need to consider the effect the GST Act has on the supply or any of its individual parts. You can then determine whether the transaction is a mixed supply because it has separate identifiable parts that the GST Act treats as taxable and non-taxable.

From the information received, the mobile phone bundle is equipped with a mobile phone and a $YY phone credit card. There are two identifiable parts in this supply so we need to consider the effect of the GST Act on these parts to determine whether the supply of the mobile phone bundle is a mixed supply or not.

Mobile phone

A supply is a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) if:

(a) the supply is for consideration; and

(b) the supply is made in the course or furtherance of an enterprise that the supplier carries on; and

(c) the supply is connected with Australia; and

(d) the supplier is registered or required to be registered for GST.

However, the supply is not a taxable supply to the extent that it is:

i. GST-free; or

ii. input taxed; or

iii. made non-taxable by a provision of the GST Act; or

iv. a supply where the requirements of paragraphs 9-5(a) to (d) of the GST Act are not met.

From the information received, the supply of the mobile phone will satisfy paragraphs 9-5(a) to 9-5(d) of the GST Act as the supply is made for consideration and in the course of the business that you carry on; the supply is connected with Australia (as it is supplied to the customer in Australia) and you are registered for GST.

Further, there is no provision under the GST Act that will make the supply of the mobile phone input taxed, GST-free or non-taxable.

The supply of the mobile phone is therefore a taxable supply under section 9-5 of the GST Act and GST is payable on the supply.

$XX phone credit card

Goods and Services Tax Ruling GSTR 2003/5 (available at www.ato.gov.au) provides guidance on the treatment of prepaid phone cards.

Prepaid phone cards are vouchers under section 100-5 and paragraph 100-25(1)(a) of the GST Act.

Under section 100-1 of the GST Act, a supply of a voucher for supplies up to a stated monetary value is not subject to GST. GST may still be payable on the supply for which the voucher is redeemed.

In this case, the $YY phone credit card is a prepaid phone card and therefore is a voucher under Division 100 of the GST Act. Accordingly, the $YY phone card is not subject to GST.

Summary

As discussed above, the supply of the mobile phone is a taxable supply under section 9-5 of the GST Act and the $YY phone credit card is not a taxable supply under Division 100 of the GST Act.

The supply of the mobile phone bundle is therefore a mixed supply of taxable and non-taxable parts. You will need to apportion the consideration between the taxable and non-taxable parts.

Question 2

GSTR 2001/8 provides guidance on the calculation of the GST payable on the taxable part of a mixed supply.

As per paragraph 119 of GSTR 2001/8, section 9-75 of the GST Act applies to work out the value of the taxable part of a mixed supply consisting of taxable and non-taxable parts that are either dealt with in specific provisions of the GST Act or do not meet the requirements of paragraphs 9-5(a) to (d) of the GST Act. The consideration that is allocated to the taxable part is the price of the taxable part referred to in section 9-75 of the GST Act. The value of that part is simply calculated as 10/11 of its price (or consideration).

The GST payable on the taxable part can be calculated as either 10% of the value of the taxable part or 1/11 of the price (or consideration) for the taxable part.

The supply of the $XX mobile phone bundle is a mixed supply of taxable and non-taxable parts. The consideration for the non-taxable part is $YY. The consideration for the taxable part is therefore $10. The GST payable on the taxable part is therefore 1/11 of $10.