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Edited version of your written advice
Authorisation Number: 1012840338265
Date of advice: 24 July 2015
Ruling
Subject: GST and non-monetary consideration
Question
Do you receive any non-monetary consideration for your supply to the customer when the customer gives a specified document to you issued in your name?
Answer
No.
Relevant facts and circumstances
You are registered for GST.
The consideration for your supply includes charges that cover the costs that you pass through to the customer.
If a customer gives you a specified document, there are no costs to be passed through to the customer.
The total amount that you charge the customer for your supply reflects the full amount of the reduction in cost that you benefit from if the document is provided to you.
The document is neither transferable nor tradeable and cannot be sourced in the market.
There is no agreement between you and the customer to assign a value to the document.
You have not treated the document as non-monetary consideration and thus, have not remitted GST on it.
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 9-15
Reasons for decision
Section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides that an entity makes a taxable supply if:
(a) the supply is made for consideration; and
(b) the supply is made in the course or furtherance of an enterprise that the entity carries on; and
(c) the supply is connected with Australia; and
(d) the entity is 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.
According to subsection 9-15(1) of the GST Act, 'consideration' includes:
• any payment, or any act or forbearance, in connection with a supply of anything; and
• any payment, or any act or forbearance, in response to or for the inducement of a supply of anything
A 'payment' is not limited to a payment of money. It includes a payment in a non-monetary or in an 'in kind' form.
Goods and Services Tax Ruling GSTR 2001/6 provides principles for identifying non-monetary consideration for a supply and explains how the GST Act applies if part or all of the consideration for a supply is not expressed as an amount of money (that is, if it is non-monetary consideration).
In identifying a non-monetary consideration, paragraphs 47 and 48 of GSTR 2001/6 state that:
47. The definition of a taxable supply requires, among other things, that you make a supply for consideration. There needs to be a supply, a payment and the necessary relationship between the supply and the payment. Where one party makes a monetary payment to another, something of economic value is provided. The question is whether there is a sufficient nexus between the supply and the payment as consideration.
48. The same analysis applies in determining whether a good, service or thing is non-monetary consideration for a supply. However, due to the breadth of the definition of consideration (and the numerous promises that each party to a transaction usually makes), establishing what is consideration for a supply is not always as simple as for monetary transactions. Nor is it always as clear if something of economic value is provided.
Paragraphs 81 and 82 of GSTR 2001/6 further state:
81. For a thing to be treated as a payment for a supply, it must have economic value and independent identity provided as compensation for the making of the supply. That is, it must be capable of being valued and be a thing that an acquirer would usually or commercially pay money to acquire. Whether this requirement is satisfied will usually be demonstrated by the parties to an arrangement assigning a specific or separate value to the thing. However, the assigning of a value by the parties is not necessary for a thing to have economic value.
82. Whether a payment is consideration for a supply depends on the true character of the transaction. Consideration for a supply is something the supplier receives for making the supply. Although a non-monetary payment (and acts or forbearances) can form consideration, the character of the transaction will determine whether it forms part of the consideration received by the supplier for making the supply.
You make the supply to the customer for which the consideration includes charges that cover the costs that you pass through to the customer.
Where the customer gives you a specified document, there are no costs to be passed through to the customer.
The issue of the document does not lead to any renegotiation or reduction of the price for your supply. Rather, it is used as a mechanism to determine the costs that you pass through to the customer. The issue of the document is not consideration for your supply to the customer. Thus, you do not receive any non-monetary consideration when the customer gives you a specified document issued in your favour.