Edited version of your private ruling

Authorisation Number: 1012472013133

Ruling

Subject: GST and tax invoice

Questions

1. Is your acquisition of a prepaid recharge for mobile internet access from a telecommunication supplier a taxable supply?

2. Is a taxable supply made to you when you use the credit (prepaid recharge) to acquire internet access services from that telecommunication supplier?

3. Are you required to hold a tax invoice when claiming an input tax credit for each of the services provided to you through your internet access from that telecommunication supplier?

Answers

1. No

2. Yes.

3. You are not required to hold a tax invoice to substantiate claims for input tax credits for each of the services provided to you through your internet access from that telecommunication supplier where the GST exclusive value of the service is $75-00 or less.

Relevant facts and circumstances

The entity (you) is registered for GST.

You acquired a prepaid recharge on an existing mobile internet facility from a telecommunication supplier.

A receipt for the recharge amount is available from your online account.

You are not provided a tax invoice for that acquisition.

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 Section 9-10

A New Tax System (Goods and Services Tax) Act 1999 Subsection 29-80(1)

A New Tax System (Goods and Services Tax) Act 1999 Section 100-5

A New Tax System (Goods and Services Tax) Act 1999 Section 100-25

Reasons for decision

Question 1

Generally, GST is payable on a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act).

You make a taxable supply under section 9-5 of the GST Act 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.

A supply is defined under section 9-10 of the GST Act to include, amongst other things, any of these:

· a supply of goods, or

· a supply of services, or

· a creation, grant, transfer, assignment or surrender of any right.

In your case, the acquisition of a prepaid recharge for mobile internet access from a telecommunication supplier is a right or entitlement to receive supplies in the future, and the obligation to make supplies, on the exercise or redemption of that right or entitlement. Accordingly, we would characterise the supply that you acquired as the right to receive a future supplies of mobile internet access.

In considering whether the supply of a prepaid recharge for mobile internet access from a telecommunication supplier is taxable it is also relevant to consider the provisions of Division 100 of the GST Act which deals with the GST treatment of vouchers.

The supply by the telecommunication supplier to you, subject to the voucher provisions which we discuss below, will be a taxable supply as the requirements of paragraphs (a) to (d) of section 9-5 of the GST Act are met and the supply is not GST-free or input taxed.

Vouchers

Division 100 of the GST Act requires that GST is payable on the supply made on redemption of the voucher if that supply is a taxable supply, rather than on the supply of the voucher itself.

If Division 100 of the GST Act applies GST will only be payable on the supply of a voucher to the extent the consideration exceeds the stated monetary value of the voucher.

To determine whether a voucher is one to which Division 100 of the GST Act applies, is a two step process. Firstly, the voucher must fall within the meaning of voucher in section 100-25 of the GST Act. Secondly, that voucher must satisfy the further requirements contained in section 100-5 of the GST Act.

Section 100-25 of the GST Act provides:

(1) A voucher is any:

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

(b) prepaid phone card or facility;

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.

(2) A prepaid phone card or facility is any article or facility supplied for the primary purpose of enabling the holder:

a. to use, on a prepaid basis, telephone or like services supplied by a supplier of telecommunications supplies; or

b. to make, on a prepaid basis, acquisitions that are facilitated by using telephone or like services supplied by such a supplier.

Paragraph 25 of Goods and Services Tax Ruling GSTR 2003/5 Goods and Services Tax: vouchers (GSTR 2003/5) states:

25. The fact that a voucher is issued and/or redeemed electronically does not exclude it from the meaning of voucher in section 100-25. A voucher that is the electronic equivalent of the physical form of a 'voucher' satisfies section 100-25. An example of this may be a visual graphic representation of the voucher on a computer screen.

The meaning of voucher in section 100-25 of the GST Act includes the requirement that the article entitles the holder to receive supplies upon its redemption. The article must be capable of being redeemed. An article, which is not redeemable for supplies, will not be a voucher.

Redemption may occur by:

· presentation of the physical voucher, including a printed electronic voucher; or

· providing a unique number or other information contained on the voucher by use of either telephone, computer or similar means.

Paragraphs 43 - 44 of GSTR 2003/5 states;

43. The use of a unique number can be in the form of a Personal Identification Number (PIN), a claim number or an access number. For some products the unique number is entered on each occasion to access the entitlement to receive supplies that is, to enable the supplies to be made in discharge of the obligation. In these cases the use of the unique number is for the single function of the presentation and redemption of the voucher for supplies. The use of the number is integral to receiving those supplies.

44. In these circumstances, the entering of the PIN or unique number or access product/number is equivalent to presenting the voucher to the supplier. The supplies made on presentation of the PIN or unique number, constitute redemption of the entitlement.

We consider that a prepaid recharge for mobile internet access from a telecommunication supplier that you acquired meets the definition of voucher in paragraph 100-25(2)(a) of the GST Act as they are articles that can be redeemed by the holder for internet services.

Section 100-5 of the GST Act imposes the following additional requirements:

· the supply of a voucher must otherwise be a taxable supply (discussed at paragraphs 57 to 67 of GSTR 2003/5);

· 'the holder of the voucher is entitled' (discussed at paragraphs 68 to 73 of GSTR 2003/5);

· upon redemption the voucher must entitle the holder to receive a reasonable choice and flexibility of supplies. (discussed at paragraphs 74 to 79 of GSTR 2003/5);

· the voucher must have a stated monetary value (discussed at paragraphs 80 to 83F of GSTR 2003/5); and

· on redemption of the voucher the holder is entitled to supplies up to its stated monetary value (discussed at paragraphs 84 to 129 of GSTR 2003/5).

We consider that the prepaid recharge for mobile internet access from a telecommunication supplier that you acquire meets the further requirements in section 100-5 of the GST Act as:

· The supply to you would otherwise be taxable supplies under section 9-5 of the GST Act as discussed above.

· You are entitled to redeem it for mobile internet access.

· It does not entitle you to a specified supply but entitles you to a reasonable choice and flexibility as to the types of supplies for which the voucher may be redeemed.

· It has a stated monetary value which is set out on the electronic voucher.

Consequently, the prepaid recharge for mobile internet access from a telecommunication supplier is a voucher for the purposes of Division 100 of the GST Act. The supply of the prepaid recharge facility by a telecommunication supplier to you is not a taxable supply and no GST is payable if you purchase it for the stated face value or less.

However, where the consideration for the supply exceeds its stated monetary value, subsection 100-5(2) of the GST Act applies and the supply of the voucher is a taxable supply to the extent the consideration exceeds the stated monetary value on the voucher.

Question 2

We refer to Appendix 3: Case Study - the application of Division 100 to prepaid phone cards or facilities in GSTR 2003/5, which was relevantly extracted as below:

1. Telco Ltd is a telecommunication supplier that is registered for GST. Telco Ltd offers a broad range of telecommunication products including prepaid phone products and services.

Prepaid mobile phones

13. Telco Ltd also sells prepaid mobile phone products. Through one of its retail outlets Telco Ltd sells a mobile phone handset, SIM card and a prepaid mobile phone card to Alison as a bundled package.

14. Alison can use her mobile phone to make phone calls, send SMS or use MMS, or access services such as email, Internet and video downloads. Alison can also use the prepaid mobile phone to make purchases of soft drinks and bottled water through a vending machine by making a phone call. When such a phone call is made an amount equal to the cost of the drink is deducted from the prepaid phone card account (which is established when Alison purchases her prepaid mobile phone product) and the vending machine dispenses the drink.

15. The prepaid mobile phone card is sold with a monetary value of $50. Alison calls a phone number set out on the card and enters an access number. When this is done the monetary value is attached to the prepaid phone account for Alison. The prepaid phone account can be topped-up by Alison if she purchases a top-up docket directly from Telco Ltd or through one of its distributors such as a supermarket or service station.

16. After Alison initially activates the prepaid mobile phone card she is not required to enter any PIN or other identifying number each time she makes a phone call or otherwise redeems the stated monetary value for supplies. The stated monetary value expires after twelve months. If Alison tops up her prepaid phone account before its expiry the topped up amount then has an expiry date of 12 months from the date of top-up.

17. The prepaid mobile phone card in conjunction with its underlying account is a prepaid phone card or facility under subsection 100-25(2). Its primary purpose is to enable Alison to use the prepaid mobile phone card to make telephone calls and access like services within its terms. As these telephone services are supplied by Telco Ltd, a supplier of telecommunication supplies, the facility to access these services is a prepaid phone card or facility in the terms of subsection 100-25(2). As Alison must effectively present the prepaid mobile phone card each time she makes a call, thereby redeeming the phone card, the prepaid mobile phone card is a voucher under section 100-25.

18. For this voucher to be a FVV, the requirements of section 100-5 must also be met. The supply of the voucher meets the requirements of section 100-5 as:

the supply is made for consideration and would otherwise be a taxable supply under section 9-5;

Alison, as the holder of the voucher is entitled to use it to acquire telephone or like services;

Alison has access to a reasonable choice of supplies including local calls, national long distance calls, international calls and calls to mobiles and other like services;

the voucher has a stated monetary value of $50; and

on redemption the voucher entitles Alison to a range of telephone calls and like services up to the stated monetary value of $50.

19. As the voucher satisfies the requirements of sections 100-25 and 100-5, its supply to Alison is the supply of a FVV and is not a taxable supply.

20. Because Alison has purchased the voucher as part of a bundled kit including a handset and SIM card, the supply of the kit is a mixed supply. The consideration for the supply of the kit needs to be apportioned between its taxable (mobile handset and SIM card) and non-taxable (prepaid mobile phone card which is a FVV) components.⁵²

21. Alison makes telephone calls to other mobiles which involves Telco Ltd making these supplies to her. As she makes each call or acquisition, Telco Ltd deducts the consideration for each supply from the stated monetary value. If the other requirements of section 9-5 are satisfied such a supply is a taxable supply by Telco Ltd.

22. After a month of accessing the telecommunication services, Alison's stated monetary value has reduced to $5. Telco Ltd is advertising a special promotion under which a person purchasing an $80 electronic top-up over the Internet for their prepaid mobile phone receives bonus supplies of an additional $15 worth of calls. Alison purchases one of these top-ups with a value of $80 on 1 August 2006. The $80 automatically attaches to Alison's account when she enters her credit card details.

23. This electronic top-up provides additional consideration for the supply of the voucher Alison purchased previously. However, under subsection 100-5(2B) only the $80 is included in the stated monetary value of the voucher. As the original voucher is a FVV, there is no GST payable when the additional consideration is received by Telco Ltd but GST will be payable when the FVV is redeemed for taxable supplies.

24. The stated monetary value of the voucher is now $85 being the sum of the $5 remaining from Alison's initial purchase of the prepaid phone card or facility and the $80 top-up amount. The $15 of bonus calls is not included in the stated monetary value of the voucher (subsection 100-5(2B)).

25. Alison uses the phone for three months and the stated monetary value of the voucher has reduced to $33. On 1 November 2006 Alison departs for an extended holiday travelling around South America for 12 months. She leaves her phone at home and the stated monetary value expires on 31 July 2007. When Telco Ltd writes back the unredeemed stated monetary value of $33 to current income, there is an increasing adjustment of $3 (1/11 x $33) being 1/11 of the stated monetary value to the extent that it was not redeemed.

In your case, when you acquired a prepaid recharge on an existing mobile internet facility from a telecommunication supplier, this is similar to paragraph 22 of purchasing top-up.

Paragraph 23 states that the electronic top-up provides additional consideration for the supply of the voucher purchased previously. As the original voucher is a FVV (face value voucher), there is no GST payable when the additional consideration is received by A telecommunication supplier, but GST will be payable when the FVV is redeemed for taxable supplies.

Paragraph 21 states that when Alison makes calls to other mobile phones which involve Telco Ltd making these supplies to her. As she makes each call or acquisition, Telco Ltd deducts the consideration for each supply from the stated monetary value. If the other requirements of section 9-5 are satisfied such a supply is a taxable supply by Telco Ltd.

In your case, as you access internet, the telecommunication supplier makes the supplies to you. The supply by the telecommunication supplier is a taxable supply to you as it will satisfy all the requirements of section 9-5 of the GST Act. That is, the supply is made for consideration; made in the course or further of an enterprise; connected with Australia; made by an entity that is registered and is not GST-free or input taxed.

Question 3

Pursuant to subsection 29-80(1) of the GST Act and regulation 29-80.01 of the A New Tax System (Goods and Services Tax) Regulations 1999, a tax invoice is not required to substantiate a claim for an input tax credit where the GST exclusive value of the creditable acquisition does not exceed $75.00.

With regard to your prepaid recharge for mobile internet access from a telecommunication supplier, the $75.00 'low value threshold' is applied on an individual service rather than an aggregate of all supplies. We accept that each individual service taken and paid for meets the requirements of section 9-5 of the GST Act and are therefore a discrete supply. Further, the predetermined price structure and 'logging on' and 'logging off' to calculate consideration differentiates one supply of services from the next.

Therefore, provided that there are no individual services that can be accessed via internet with a value in excess of $82-50 (inclusive of GST), your acquisitions will fall within the low value concession for holding tax invoices conferred by subsection 29-80(1) of the GST Act.

Consequently, you will not be required to hold a tax invoice to substantiate claims for input tax credits for individual services with a GST exclusive value of $75.00 or less and the telecommunication supplier is not obliged to provide a tax invoice to you.

However, you may need to substantiate that all telecommunication supplies to you:

· were taxable supplies to you; and

· were all creditable acquisitions