Edited version of your written advice

Authorisation Number: 1051332593951

Date of advice: 1 February 2018

Ruling

Subject: Cash redemption of loyalty points

Question

Are you required to remit GST on the redemption of their loyalty points under a loyalty program for cash?

Answer

No, you are not required to remit GST on the redemption of your loyalty points under a loyalty program for cash.

Under section 7-1 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act).

GST is payable on taxable supplies. Under section 9-5 of the GST Act, the first requirement that must be satisfied in order for a supply to be a taxable supply is that the supply must be made for consideration. For this requirement to be met, the following three things must be satisfied:

1. There must be a supply.

2. There must be consideration.

3. There must be a nexus between the supply and the consideration. That is, the supply must be made for consideration.

Generally, for GST purposes, the redemption of points is not regarded as consideration made by the loyalty program member for a supply of goods made by the loyalty program operator. Therefore the second requirement mentioned above is not satisfied.

In a cash redemption situation, there is also no supply being made as the supply of money is not a supply for GST purposes. Therefore, the first requirement mentioned above is also not satisfied. Therefore in the absence of a supply made for consideration, there will be no GST payable on the redemption of your loyalty points for cash.

Further, in this case:

● you have not entered into an alternative arrangement with the program operator to sell your loyalty points to the program operator or any other entity for cash; and

● the redemption of your loyalty points for cash was made under the same terms and conditions as per the loyalty program (except to the extent that points were redeemed for cash instead of goods).

Therefore, we also do not consider that you have made a supply of your loyalty points for which the cash provided by the program operator is consideration. Accordingly there cannot be a taxable supply as the first requirement of a taxable supply is not satisfied and therefore no GST is payable.

Relevant facts and circumstances

You carry on an enterprise of operating several clinics.

You purchase your supplies from entity A.

Entity A operates a loyalty program of which you are a member.

Each member of entity A will accrue points in the loyalty program relative to the number of Australian dollars charged, billed by entity A and paid on a transaction by the due date.

Whilst a clause of the loyalty program agreement specifically states that the points accrued under loyalty program are not redeemable for cash, recently, you have negotiated with entity A to redeem your points earned under the loyalty program for a particular sum of cash. The terms and conditions to redeem the points for cash were the same as those under the loyalty program (except that instead of the points being redeemed for goods they were being redeemed for cash). There was no alternative agreement entered into between you and entity A whereby you were required to sell your points to entity A for cash.

Accordingly, you were still required to follow the normal process of redeeming your points.

Entity A merely agreed to allow the points that you have accrued under the loyalty program to be redeemed for cash during a period where you were under financial constraints.

Entity A has provided you an invoice which outlines the payment of the sum of cash as having no GST included in this amount.

You and entity A are not related entities.

Relevant legislative provisions

Section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999