ATO ID 2005/306: GST and unclaimed money from the cancellation of lay-by sales
Date of decision: 7 December 2004
Business line: Indirect Tax

Issue
Is unclaimed money held by the entity, a retailer in Victoria, for a customer in relation to a cancelled lay-by sale and to be paid to the Registrar, as required by the Unclaimed Moneys Act 1962 (Vic) if it remains unclaimed, treated as consideration for a supply made by the entity under section 102-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Decision
No, the unclaimed money is not treated as consideration for a supply made by the entity under section 102-5 of the GST Act.

Facts
The entity is a retailer located in Victoria and is registered for goods and services tax (GST). The entity enters into a lay-by agreement with a customer to sell goods. The customer makes an initial payment then fails to make any other payments on the lay-by. The entity cancels the agreement and holds the initial payment for the customer to collect. For purposes of the Unclaimed Moneys Act: The entity continues to hold the initial payment for the customer's collection until the Unclaimed Moneys Act requires the entity to pay it to the Registrar.

Reasons for decision
Summary: Section 102-5 of the GST Act provides, amongst other things, that if a supply by way of lay-by sale is cancelled, any amount retained or recovered by the supplier because of the cancellation is treated as consideration for a supply made by the supplier. Although the entity has the customer's initial payment, the entity is holding this money for the customer to collect. If it remains unclaimed for 12 months or more it becomes 'unclaimed moneys' under the Unclaimed Moneys Act and the entity will be required to forward the money to the Registrar. The entity does not have any right to take the money into its revenue and use it for its own purposes. The entity is merely holding the money on trust for the customer. The entity does not retain the money for the purposes of section 102-5 of the GST Act. This means the money is not treated as consideration for a supply.

Legislative references: A New Tax System (Goods and Services Tax) Act 1999 section 102-5
Related public rulings and determinations: GSTR 2000/12
Subject references: Goods and services tax GST special rules GST lay by sales GST supplies & acquisitions GST consideration