Edited version of private ruling

Authorisation Number: 1011827993938

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Ruling

Subject: Vouchers

Question 1

Is the consideration received by Entity X for the supply of goods and/or services and the supply of the voucher as part of a single transaction required to be apportioned?

Answer: Yes.

Question 2

Is the amount of the consideration allocated to the supply of the voucher the monetary face value on the voucher?

Answer: Yes.

Relevant facts

Entity X carries on an enterprise consisting of the wholesale and retail supply of a product.

Entity X is registered for GST.

Entity X regularly has promotional offers for the purpose of supporting additional sales of its products.

Entity X will commence a promotional offer where customers who spend over a particular threshold on specified products will receive voucher (Voucher), with a stated monetary value.

The Voucher will be provided by Entity X to a customer for no additional consideration.

The Voucher will allow the customer to redeem the amount shown on the Voucher towards payment of goods and/or services. The customer can select from a number of options for which the voucher can be used upon redemption.

Each voucher includes a serial number and batch number and is redeemable within a specified period subject to the Voucher Term and Conditions.

Under the Terms and Conditions where an amount of the Voucher is not used Entity X will provide to the customer a credit that can be subject to the same Terms and Conditions as the Voucher.

Reasons for decision

Question 1: Is the consideration received by Entity X for the supply of goods and/or services and the supply of the voucher as part of a single transaction required to be apportioned?

Section 9-15 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides the meaning of consideration and states:

(1) Consideration includes:

(a) any payment, or act or forbearance, in connection with the supply of anything; and

(b) any payment, or any act or forbearance, in response to or for the inducement of a supply of anything.

What has been supplied by Entity X is a product and a voucher. The consideration is the amount paid by the customer. The issue here is deciding whether any part of that consideration is in relation to the supply of the voucher.

The treatment of a transaction where a face value voucher (FVV) is supplied as part of a package and there is a single amount of consideration, is expressed in Goods and Services Tax Ruling GSTR 2003/5: Vouchers (GSTR 2003/5). In particular paragraph 131 of GSTR 2003/5 states:

131. The fact that a FVV supplied as part of a package for one amount of consideration is described as being 'free' does not mean that consideration cannot be apportioned to the supply of the FVV. This means that, for example, in a transaction in which a 'free' FVV is supplied on condition that something else is purchased, the purchase price is consideration for all of the things supplied, including the 'free' FVV and consideration should be apportioned to the supply of the FVV.

Therefore, for the purpose of establishing if Entity X is required to apportion the single consideration that they receive from customers during the promotional period for the supply of a voucher along with a product, what remains to be determined is whether the supply of the voucher by Entity X is a FVV.

What is a FVV?

A voucher that satisfies both section 100-25 and 100-5 of the GST Act is referred to as a FVV.

Section 100-25

Pursuant to subsection 100-25(1) of the GST Act a voucher is 'any voucher, token, stamp, coupon or similar article the redemption of which in accordance with its terms entitles the holder to receive supplies in accordance with its terms '.

It has been submitted by Entity X that the supply of the Voucher is a voucher within the meaning of section 100-25(1) of the GST Act. This is on the basis that:

· the layout of the document is consistent with how you would expect a voucher to be presented;

· it has a monetary amount stated on the face of the voucher;

· the terms and conditions of the voucher are printed on the back;

· the voucher must be redeemed in the specified period;

· the voucher has a serial number and batch number.

For the purposes of establishing if an article is a voucher according to subsection 100-25(1) of the GST Act paragraph 22 and 26 of GSTR 2003/5 state:

22. For an article to be a voucher for the purpose of subsection 100-25(1) it must upon redemption entitle the holder to receive supplies in accordance with its terms. This could, for example, include a voucher in the form of a letter

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

· it must satisfy either paragraph 100-25(1)(a) or (b);

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

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

We agree with the submission that the Voucher provided by Entity X will satisfy the requirements of a voucher under paragraph 100-25(1)(a) of the GST Act. This is on the basis that upon redemption of the Voucher the holder (customer) is entitled to receive supplies in accordance with its terms and condition. Further the presentation of the Voucher is essential to receive the supplies.

Section 100-5

Section 100-5 of the GST Act 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 supply of the voucher does not exceed the stated monetary value of the voucher.

…

(2A) The stated monetary value, in relation to a *voucher other than a *prepaid phone card or facility, means the monetary value stated on the voucher or in documents accompanying the voucher.

(terms marked with asterisks (*) are defined in section 195-1 of the GST Act).

Paragraph 55 of GSTR 2003/5 outlines on the additional requirements that must be considered to satisfy section 100-5 of the GST Act as:

· the supply of the voucher must otherwise be a taxable supply;

· 'the holder of the voucher is entitled';

· upon redemption the voucher must entitle the holder to receive reasonable choice and flexibility of supplies;

· the voucher must have a stated monetary value; and

· on redemption of the voucher the holder is entitled to supplies up to its stated monetary value.

Otherwise taxable supply

Taxable supply is defined in section 9-5 of the GST Act as follows:

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.

Entity X supplies a voucher to a customer. Consistent with paragraph 131 of GSTR 2003/5 we are of the view that where a customer makes an acquisition of 'something' from Entity X according to the promotion requirements where a voucher is also supplied there will be consideration provided by the customer for the supply of the voucher by Entity X. The supply of the voucher meets the all the other requirements of section 9-5 of the GST Act and therefore, the supply of the voucher is an otherwise taxable supply.

Other requirements outlined in paragraph 55 of GSTR 2003/5

Under the Terms and Conditions of the promotion, the customer who is the holder of the voucher will be entitled to receive supplies up to the stated monetary value of the voucher. That is, upon redemption of the Voucher the effect is the same as the customer providing an equivalent amount of cash for the supply of the redeemable goods. Further, the Terms and Conditions provides that where the customer does not fully redeem the Voucher, a credit is provided of the unused amount to the customer which can be applied for future use under the same Terms and Conditions.

Paragraph 74 of GSTR 2003/5 explains that the terms of a voucher must entitle the holder to a reasonable choice and flexibility as to the types of supplies for which the voucher may be redeemed.

In this case, the customer has numerous options for which they can redeem the voucher therefore it is evident that the customer has a reasonable choice and flexibility of supplies upon redemption. Further the requirement that the voucher has a stated monetary value, and that on redemption the customer is entitled to supplies up to the stated monetary value are evident.

Therefore we agree with the submission that the voucher will satisfy section 100-5 of the GST Act.

As the supply of the Voucher by Entity X satisfies both section 100-25 and 100-5 of the GST Act it is a face value voucher. Accordingly, Entity X is required to apportion the consideration received for the supply of the package which consists of the products and voucher they supply consistent with paragraph 131 of GSTR 2003/5.

Question 2: Is the amount of the consideration allocated to the supply of the voucher the monetary value on the voucher?

It is submitted by Entity X that as the consideration received for the supply of the goods and/or services and the Voucher is a single amount and Entity X should for the purpose of calculating its GST liability allocate some consideration to the supply of the Voucher. This is consistent with paragraph 132 of GSTR 2003/5.

Paragraph 132 of GSTR 2003/5 states:

132. The amount of the consideration to be apportioned to the supply of a FVV is the stated monetary value of the FVV. This is because the consideration for the supplies to be made on redemption of the FVV is the stated monetary value of the FVV (refer to paragraphs 89 to 90)

In this case we accept that the amount attributable to the Voucher will be the face value of the Voucher. As a result the amount attributable to the other component of the sale (taxable amount) is equal to the balance of the purchase price remaining once the face value of the Voucher has been deducted.