Edited version of private advice

Authorisation Number: 1051551455709

Date of advice: 2 September 2019

Ruling

Subject: GST and vouchers

Question 1

Are you making supplies of face value vouchers (FVV) under Division 100 of the A New Tax System (Goods and Services Tax) Act 1999 when you supply gift cards?

Answer

No. To be a FVV under Division 100 of the GST Act the supply of the voucher must otherwise be taxable. As you are not registered or required to be registered for GST your supply of vouchers are not supplies of FVVs.

Relevant facts and circumstances

·        You are not registered for the goods and services tax (GST). You advise that you are also not required to be registered for GST.

·        You sell gift cards.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999, Section 11-5

A New Tax System (Goods and Services Tax) Act 1999, Section 11-20

A New Tax System (Goods and Services Tax) Act 1999, Division 100

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

A New Tax System (Goods and Services Tax) Act 1999, Section 100-18

Reasons for decision

Vouchers

The supply of a voucher will be a taxable supply where the requirements of section 9-5 of the GST Act are met. Division 100 of the GST Act operates to effectively defer the taxing point for supplies of vouchers until the voucher is redeemed.

The Commissioner of Taxation sets out his view of how the GST Act applies to vouchers in Goods and Services Tax Ruling: Vouchers (GSTR 2003/5). GSTR 2003/5 explains that determining whether a voucher is one to which Division 100 of the GST Act applies, involves a two-step process.

Firstly, the voucher must fall within the meaning of 'voucher' in section 100-25 of the GST Act (see paragraphs 20 to 54 of GSTR 2003/5) and secondly, that the voucher must satisfy the further requirements contained in section 100-5 of the GST Act (paragraph 56 of GSTR 2003/5). Some requirements are common to both sections.

Step 1.

Meaning of voucher in section 100-25 of the GST Act.

Section 100-25 of the GST Act states:

(1) A voucher is any:

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

...

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.

In determining whether an article is similar to a voucher, token, stamp or coupon its characteristics, function and purpose must be taken into consideration.

For an article to be a voucher for the purposes of subsection 100-25(1) of the GST Act it must upon redemption entitle the holder to receive supplies in accordance with its terms.

GSTR 2003/5 explains the fact that a voucher is issued and/or redeemed electronically does not exclude it from the meaning of a voucher in section 100-25 of the GST Act. A voucher that is the electronic equivalent of the physical form of a voucher satisfies section 100-25 of the GST Act.

Redemption of a voucher

The meaning of voucher in section 100-25 includes the requirement that the article entitle 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.

Paragraph 42 of GSTR 2003/5 provides:

Redemption involves the contemporaneous provision of supplies in discharge of the obligation evidenced by a voucher. The making of those supplies must discharge the supplier from the obligation to make the supplies. 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.

The gift cards/vouchers you sell will meet the definition of a voucher for the purposes of subsection 100-25(1) of the GST Act.

Step 2

Section 100-5 requirements.

Section 100-5 of the GST Act does three things. Firstly, it imposes additional conditions that must be satisfied before a voucher that satisfies section 100-25 of the GST Act will be a FVV. Secondly, subject to the conditions in the section, it states that the supply of a voucher that meets such conditions is not a taxable supply. Thirdly, it directs how the consideration for a taxable supply of the voucher is to be ascertained.

The additional conditions of section 100-5 of the GST Act are set out in paragraph 56 of GSTR 2003/5:

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

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

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

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

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

The holder of the voucher is entitled

The "holder" is whoever has ownership, power of disposal, use or possession of the voucher.

Paragraphs 69 and 70 of GSTR 2003/5 provide:

69. Vouchers are usually issued without stipulating any particular entity who is entitled to the supplies on redemption. Some vouchers may be issued to a specific entity, which alone may redeem the voucher. Some vouchers may state that they are 'not transferable'. However, most vouchers are freely transferable and anonymous.

70. In the case of transferable, anonymous vouchers, the 'holder' is the person who has possession or use of the voucher at the time of redemption.

Upon redemption the voucher must entitle the holder to receive a reasonable choice and flexibility of supplies

The Commissioner in GSTR 2003/5 takes the view that Division 100 of the GST Act does not cover vouchers or other things that are for a specified good or service (e.g. a bus ticket), even if a monetary value or price is stated on the voucher. These types of supplies are subject to the normal GST rules. Further the terms of a voucher to which Division 100 of the GST Act applies must entitle the holder to a reasonable choice and flexibility as to the types of supplies for which the voucher may be redeemed.

The voucher must have a stated monetary value

The supplies to which the holder is entitled under section 100-5 of the GST Act are supplies up to the stated monetary value, not supplies of a stated monetary value. A voucher that entitles its holder to a specified supply is not one to which subsection 100-5(1) of the GST Act applies, even if the monetary value or price is stated on the voucher.

The stated monetary value of a voucher, other than a prepaid phone card or facility, means the monetary value stated on the voucher or in documents accompanying the voucher when it is issued.

The supply of a voucher must otherwise be a taxable supply

The requirement that the supply must otherwise be a taxable supply also means the supply of the voucher must not be a financial supply. Vouchers which are financial supplies must be considered under Subdivision 40-A of the GST Act, not Division 100 of the GST Act. Based on the information provided the vouchers you sell are not considered to be financial supplies.

Paragraph 9-5(d) of the GST Act requires that for a supply to be a taxable supply, the supplier must be registered or required to be registered for GST.

In your case section 100-5 of the GST Act does not apply to the vouchers you sell as you are not registered or required to be registered for GST and you do not meet the requirement that the supply of a voucher otherwise be a taxable supply. Therefore, the vouchers you supply are not FVV.

Question 2

Section 11-20 of the GST Act states that you are entitled to an input tax credit for any creditable acquisition that you make.

Section 11-5 GST Act provides that you make a 'creditable acquisition' if:

·        you acquire anything solely or partly for a creditable purpose;

·        the supply to you is a taxable supply;

·        you provide consideration for the supply; and

·        you are registered or required to be registered for GST.

Section 11-15 of the GST Act provides that you acquire something for a creditable purpose to the extent that you acquire the thing in carrying on your enterprise and the acquisition does not relate to making input taxed supplies or is of a private or domestic nature.

In your case you are not making input taxed supplies (financial supplies) when you sell the vouchers. However, as you are not registered or required to be registered for GST you are not making a creditable acquisition under section 11-5 of the GST Act. Therefore, you will not be entitled to input tax credits pursuant to section 11-20 of the GST Act.