Private ruling: GST
Published: October 2011

Ruling: Q1: Did you make a taxable supply of an entry into an obligation? | A1: Yes | Q2: Did the item, transferred to you, constitute non-monetary consideration for the taxable supply made by you of an entry into an obligation to do something? | A2: Yes | Q3: Did the entity make a taxable supply of the item to you for which the entry by you into an obligation to do something is non-monetary consideration? | A3: Yes | Q4: Did you make a creditable acquisition by accepting the item at its GST inclusive market value? | A4: Yes | Q5: Do you have an input tax credit entitlement of the GST amount? | A5: Yes | Q6: Can you now revise your Business Activity Statement (BAS) for the relevant quarter and claim an input tax credit of the GST amount which you omitted to claim in that BAS? | A6: Yes

Relevant facts and circumstances: You are registered for GST. An item was given to you in exchange for your entry into an obligation to the giver to do something. The item that was received at its GST inclusive market value.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 Section 9-5, | Section 9-15, | Section 11-5, | Section 11-10, | Section 11-15

Reasons for decision: Summary: Question 1 You made a taxable supply of an entry into an obligation when you received an item. | Detailed Reasoning - Under section 9-5 of the GST Act, for a supply to be a taxable supply it must be for consideration.: A supply is something which passes from one entity to another, and is broadly defined as any form of supply whatsoever. A supply may be an agreement by one party to do something for another. In your circumstances the item is given to you in exchange for your entry into an obligation to the giver to do something. The supply of this obligation comes within the definition of a supply. You receive the item because you have entered into this binding obligation. Therefore the item will be consideration for your supply of the obligation. You have made a supply for consideration, you are registered for GST, the supply is connected with Australia and the supply is in the course or furtherance of your enterprise. This supply of the entry into the obligation is therefore a taxable supply. Question 2 As discussed above, you have entered into an obligation. Subsection 9-15(1) of the GST Act provides that consideration includes any payment. The giving of the item forms non-monetary consideration for this supply. Your supply of an obligation is therefore a taxable supply. Question 3 The entity has made a taxable supply of an item to you for which you have an obligation to do something is non-monetary consideration. As this item is in return for another supply (your entry into a binding obligation to do something), there is a supply by you and the entity to each other. Where both supplies are taxable supplies, each party will be liable for GST on the supply it makes. Question 4 You made a creditable acquisition by accepting the item at its GST inclusive market value. As discussed above, the entity has made a taxable supply of the item to you for the GST inclusive market value. An acceptance of the item constitutes an acquisition. You are registered for GST and the acquisition of the item is for a creditable purpose. You have provided consideration being the entry into obligations to do something. This satisfies the criteria for a creditable acquisition under section 11-5 of the GST Act. Question 5 | Detailed Reasoning - You have an input tax credit entitlement of the GST amount.: As a result of the reasoning in question 4, you have made a creditable acquisition. You are therefore entitled to an input tax credit of the GST amount. As explained in GSTR 2001/6, where transactions such as this are wholly for non-monetary consideration the tax impacts for both parties will be that they remit and claim back the same GST amounts, therefore there is no overall net GST effect. Where you receive any non-monetary consideration for a supply, the price includes the GST inclusive market value of that consideration. You have therefore received a supply valued at the GST inclusive market value. Question 6 You can revise your Business Activity Statement (BAS) for the relevant quarter and claim an input tax credit of the GST amount which you omitted to claim in this BAS. Disclaimer You cannot rely on the rulings in the Register of private binding rulings in your tax affairs. You can only rely on a private ruling that we have given to you or to someone acting on your behalf. The Register of private binding rulings is a public record of private rulings issued by the ATO. The register is an historical record of rulings, and we do not update it to reflect changes in the law or our policies. The rulings in the register have been edited and may not contain all the factual details relevant to each decision. Do not use the register to predict ATO policy or decisions. on. Do not use the register to predict ATO policy or decisions.

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