Edited version of private advice

Authorisation Number: 1051935555784

Date of advice: 20 January 2022

Ruling

Subject: GST and face value vouchers

In this reasoning,

•                unless otherwise stated, all legislative references are to the A New Tax System (Goods and Services Tax) Act 1999 (GST Act),

•                all legislative terms of the GST Act marked with an asterisk are defined in section 195-1 of the GST Act,

•                all reference materials, published by the Australian Taxation Office (ATO), that are referred to are available on the ATO website ato.gov.au

Question 1

Are the vouchers sold by the company to Australian consumers face value vouchers?

Answer 1

Yes. According to the information provided the vouchers sold by the company to Australian consumers are considered to be face value vouchers (FVV).

Question 2

Are the vouchers sold to overseas consumers subject to Division 38 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer 2

Yes.The vouchers sold to overseas consumers for use overseas are subject to Division 38 of the GST Act.

Question 3

What is the GST Treatment when vouchers are not redeemed?

Answer 3

Vouchers that are not redeemed will be the subject of an increasing adjustment where they come under Division 100. However, no adjustment will be necessary for vouchers which supply will not otherwise be considered a taxable supply under section 9-5 of the GST Act.

This ruling applies for the following period:

Year ending 30 June 2025

The scheme commences on:

25 October 2021

Relevant facts and circumstances

The company is registered for GST.

The company sells vouchers to customers who are in and outside Australia. The vouchers sold to these customers are for services provided in and outside Australia.

The vouchers can be purchased only through the internet.

The vouchers sold are vouchers for services and dollar amount vouchers.

The vouchers for services can be exchanged for a different service by customers during the period of their validity.

The services to which the vouchers relate can be performed either in Australia or overseas.

The vouchers sold can be exchanged for different experiences with reasonable flexibility.

The company is not the operator or supplier for any experience or product sold through the platform.

Voucher purchases are strictly non-refundable.

Entities that are delivering the experiences for the end customer will have the booking sent to them directly via an application programming interface connection to their reservation system, or occasionally by manual request.

The total value charged to the purchaser is the stated monetary value of the vouchers. The purchaser chooses the value.

The voucher holder can choose to book a more expensive experience, where they then pay the difference. E.g., If a voucher holder has a $100 AUD gift voucher and the experience is $120 AUD, they will pay the remaining $20 AUD at the time of booking. Vouchers otherwise cannot be recharged; however, a new gift voucher could be given to the same voucher holder.

The vouchers are issued with a redemption code. The voucher holder cannot recharge or reload the voucher; however, they can book a more expensive experience, or they can be given another voucher and combine the value of multiple vouchers.

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 38-190

A New Tax System (Goods and Services Tax) Act 1999 sections 100-5, 100-15, 100-25

Reasons for decision

Question 1

Are the vouchers sold by the company face value vouchers?

Summary

Yes. The vouchers sold by the company to Australian consumers are considered to be face value vouchers.

Detailed reasoning

To be a voucher to which Division 100 applies, an article must satisfy the definition of 'voucher' in sections 100-25 as well as the additional requirements in section 100-5

Section 100-25 requirements

Subsection 100-25(1) of the GST Act provides that 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.

Goods and Services Tax Ruling (GSTR 2003/5) explains the Commissioner's view on how the A New Tax System (Goods and Services Tax) Act 1999 ('GST Act') applies to vouchers.

As provided in paragraph 26 of GSTR 2003/5, for a voucher to fall within section 100-25 the following conditions should be present:

•                the voucher must satisfy either paragraph 100-25(1)(a) or (b);

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

•                on redemption, the voucher must entitle the holder to receive supplies.

The GST Act does not define 'voucher', 'token', 'coupon', 'stamp' or 'article'. Therefore, these terms take their ordinary meaning and refer to things that are exchangeable for goods or services. When they are redeemed, the right or entitlement to receive goods or services ceases to exist.

Paragraph 29 of GSTR 2003/5 provides that a voucher that has more than one function is not a voucher within the meaning of paragraph 100-25(1)(a).

The information provided indicates the vouchers issued by the company satisfy the requirements of section 100-25 of the GST Act as they have a single function and cannot be recharged/reloaded, their presentation is integral to supplies on redemption and on redemption the holders of the vouchers are entitled to receive supplies in the form of experience categories including food and drink, tours, adrenaline thrills, health and wellness.

Section 100-5 requirements

Paragraph 56 of GSTR 2003/5 provides that for a FVV first to be a voucher as defined in section 100-25 of the GST Act the following additional requirements of section 100-5 and their consequences have to be considered:

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

•                the holder of the voucher is entitled to supplies;

•                upon redemption the voucher must entitle the holder to receive a 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.

The supply of a voucher must otherwise be a taxable supply

For the purposes of section 9-5 of the GST Act a supply is taxable if it is made for consideration, in the course or furtherance of an enterprise, the supply is connected with Australia and the entity making the supply is registered or required to be registered for GST.

However, the supply is not taxable to the extent that it is GST-free or input taxed.

Where all the elements of section 9-5 are met a supply will be taxable.

The holder of the voucher is entitled to supplies

Under the scheme a holder of the voucher will be entitled to supplies.

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

In this case we have been informed that upon redemption the vouchers offer reasonable choice and flexibility of supplies.

The voucher must have a stated monetary value

We have been made aware that all vouchers provided by the company have stated monetary values, even those vouchers that are sold as an experience. The experience comes with a dollar value equivalent attached.

On redemption of the voucher the holder is entitled to supplies up to its stated monetary value

Under the term of the scheme the holder is entitled to supplies up to its stated monetary value plus additional consideration if they choose to book a more expensive experience.

Therefore, a voucher issued under the terms of the scheme described above will be a FVV for GST purposes and when supplied to Australian consumers, by the company, will be subject to Division 100.

Question 2

Are the vouchers sold to overseas consumers subject to Division 38 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Summary

Yes.The vouchers sold to overseas consumers for use overseas are subject to Division 38 of the GST Act.

Detailed reasoning

We have already agreed that vouchers supplied to Australian consumers for consumption in Australia come under Division 100. We now need to consider whether vouchers supplied to overseas entities for consumption overseas come under Division 100.

One of the conditions for a voucher to be considered a FVV under Division 100 is whether the supply of the voucher would otherwise be a taxable supply.

Relevantly, the supply of a voucher by the company will be a taxable supply under section 9-5 of the GST Act unless it is GST-free or input taxed. The input tax aspect is irrelevant in the current case.

Subsection 9-30(1) provides that a supply is GST-free if:

a)    it is GST-free under Division 38 or under a provision of another Act; or

b)    it is a supply of a right to receive a supply that would be GST-free under paragraph (a).

GSTR 2003/8 examines the operation of paragraph (a) of item 4 in the table in subsection 38-190(1) and subsection 38-190(2) of the GST Act. That subsection sets out supplies of things for consumption outside Australia (other than goods or real property) that are GST-free.

Item 4 (a) of the table in subsection 38-190(1) provides that a supply is GST-free if it is made in relation to rights if the rights are for use outside the indirect tax zone.

Paragraph 13 of GSTR 2003/8 has been reproduced below:

GST-free supplies

13. A supply is GST-free if it is GST-free under Division 38 or under a provision of another Act. The supply of a right to receive a GST-free supply is also GST-free.

ATO Interpretative Decision (ATO ID 2013/24) states the following:

Relevantly, the supply of the voucher by the entity will be a taxable supply under section 9-5 of the GST Act unless it is GST-free or input taxed. The input tax aspect is irrelevant in the current case.

It is considered that a voucher is a supply of a right to receive supplies in the future. In the present case, the voucher supplied by the company entitles the holder to receive supplies that would be GST-free where the voucher is issued to overseas entities for consumption overseas. That is, the supply of the voucher will be a supply of a right to receive supplies, the GST status of which will be considered as being GST-free. As such, paragraph 9-30(1)(b) will be satisfied and subsequently the supply of the voucher will not otherwise be a taxable supply under section 9-5.

This means that section 100-5 will not apply where a supply comes under Division 38 and therefore, the other provisions of Division 100 will also not apply.

Please note that subsection 38-190(2) provides that a supply covered by any of items 1 to 5 in the table in subsection (1) is not GST-free if it is the supply of a right or option to acquire something the supply of which would be connected with the indirect tax zone.

Question 3

What is the GST Treatment when vouchers are not redeemed?

Answer 3

Vouchers that are not redeemed will be the subject of an increasing adjustment where they come under Division 100. However, no adjustment will be necessary for vouchers which supply will not otherwise be considered a taxable supply under section 9-5.

Detailed reasoning

Section 100-15 of the GST Act provides that an entity will have an increasing adjustment when the conditions set out in that section are met. Section 100-15 provides that an entity has an increasing adjustment if:

(a) it supplied a voucher for consideration; and

(b) on redemption of the voucher, the holder of the voucher was entitled to supplies up to the stated monetary value of the voucher; and

(c) the voucher has not been fully redeemed; and

(d) the entity has, for accounting purposes, written back to current income any reserves for the redemption of the voucher.

The amount of the increasing adjustment is 1/11 of the stated monetary value of the voucher to the extent that it was not redeemed.

The Commissioner's view on the application of section 100-15 of the GST Act is set out at paragraph 121 of GSTR 2003/5. It states the following:

Increasing adjustments for unredeemed FVV s - section 100-15

121. Section 100-15 applies only to FVVs. There may be circumstances where some FVVs are not redeemed. Section 100-15 requires increasing adjustments to account for the GST payable on FVVs where:

•                a voucher was supplied for consideration;

•                the voucher was a FVV;

•                the voucher has not been fully redeemed; and

•                the supplier of the voucher writes back, for accounting purposes, to current income any reserves for the redemption of the voucher.

Therefore, where a voucher is a FVV section 100-15 will apply to the unredeemed vouchers. Consequently, vouchers that are not redeemed will be the subject of an increasing adjustment where they come under Division 100.

Paragraphs 11 & 12 of GSTR 2003/5 state:

11. For the purposes of this Ruling, a voucher which satisfies both sections 100-25 and 100-5 is referred to as a 'face value voucher' (FVV).

12. The supplies on redemption of a FVV will be taxable if the requirements of section 9-5 are met. An input tax credit for the acquisition made on redemption of the voucher may arise if the requirements of section 11-5 are met.

As stated above section 100-5 will not apply where a supply is considered GST-free under Division 38 and therefore, the other provisions of Division 100 will also not apply.

This means that no adjustment will be necessary for vouchers which supply will not otherwise be considered a taxable supply under section 9-5.

However, an adjustment is necessary for unredeemed vouchers where those articles are subject to Division 100.

You mentioned ATO ID 2013/24 in your correspondence with us. This ATO ID refers to vouchers which could be redeemed for either GST-free or taxable supplies and the GST-status of those supplies were not know at the time the vouchers were supplied. Consequently, the vouchers at the time they were supplied were subjected to the modified rules in Division 100.

The principles to be extracted from this ATO ID is that an increasing adjustment is enlivened where there is a supply for consideration that attracts the modified rules in Division 100 and the voucher has not been fully redeemed as to its face value. There is nothing in the legislation about whether the voucher would have been redeemed for a supply that would be GST-free or input-taxed once Division 100 has applied to the supply of a voucher.