Private ruling: GST and the supply and redemption of vouchers
Date of advice: 22 March 2016
Published: May 2016

Ruling: Q1: Does the supply and redemption of a voucher 'given away' (A2 voucher) to promote the opening of a new store or donated to not for profit bodies give rise to a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act (GST Act)? | A1: No, the supply of the A2 voucher does not give rise to a taxable supply under section 9-5 of the GST Act, as the supply of the A2 voucher is 'given away' for no consideration. The supply of goods on redemption of the A2 voucher does not give rise to a taxable supply unless consideration in addition to the monetary value stated on the voucher is provided. Where additional consideration is provided there is a taxable supply to the extent the additional consideration exceeds the monetary value stated on the A2 voucher and the requirements for a taxable supply are otherwise satisfied. | Q2: Are you making a 'mixed supply' for consideration when issuing a voucher under a reward arrangement (A3 voucher)? | A2: No, you are not making a 'mixed supply' for consideration when issuing an A3 voucher. | Q3: Does the supply and redemption of an A3 voucher satisfy the requirements of Division 100 of the GST? | A3: No, as the supply of the A3 voucher is not a mixed supply and is 'given away' for no consideration, the supply of the voucher is not a taxable supply. As such, the supply of an A3 voucher is not one covered by section 100-5 of the GST Act and thereby does not satisfy the requirements of Division 100 of the GST Act. As with question 1, the supply of goods on redemption of an A3 voucher does not give rise to a taxable supply, unless consideration in addition to the monetary value stated on the voucher is provided. Where additional consideration is provided for the redeemed goods there is a taxable supply to the extent the additional consideration exceeds the monetary value stated on the A3 voucher. | Q4: Is there a GST increasing adjustment under section 100-15 of the GST Act on the write back to Cost of Goods Sold (COGS of unredeemed A2 and A3 vouchers? | A4: No, there is no increasing adjustment under section 100-15 of the GST Act in relation to unredeemed A2 and A3 vouchers.

Relevant facts and circumstances: You are a retailer of goods and under a number of arrangements you supply, in the course of your enterprise, vouchers that all satisfy the definition of a voucher under subsection 100-25(1) of the GST Act. That is, the voucher entitles, on redemption of the voucher, the holder to receive supplies in accordance with its terms. The presentation of the voucher is integral to the supplies on redemption and the voucher's function ceases once it is fully redeemed (i.e. they have a single function) and cannot be reloaded. Arrangement 2 Under the promotional arrangement you 'give' A2 vouchers away for no consideration (for 'free') as part of promotional activities on the opening of stores or as donations to not for profit bodies. The A2 voucher entitles the holder on redemption of the voucher to a range of goods up to the monetary value stated on the voucher. Where the A2 voucher is redeemed for goods that have a value in excess of the monetary value stated on the voucher, the customer will provide additional consideration for the difference. Arrangement 3 You implemented a reward voucher program where for every $X (GST inclusive) worth of goods purchased, a customer would receive a voucher (A3 voucher) with a monetary value that was GST inclusive. To qualify for the A3 voucher, a customer must be a program member and the customer must process/allocate the purchases through the customer's program account. The arrangement allows customers to accumulate purchases the customer makes to satisfy the $X eligibility 'purchase' requirements. The eligible purchases do not have to be made in a single transaction but can be accumulated over time. The A3 vouchers supplied on reaching the eligible purchase can be redeemed for goods equal to the monetary value stated on the voucher. You report and remit in your activity statements 1/11 th of the monetary value stated on the A3 voucher in the tax period in which the A3 voucher is redeemed for goods. Where the A3 voucher is redeemed for goods that have a value in excess of the monetary value stated on the voucher, the holder provides additional consideration for the difference. Both the A2 and A3 vouchers can be redeemed for goods in any of your stores, the supply of which is neither input taxed nor GST-free.

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 9-10 | A New Tax System (Goods and Services Tax) Act 1999 Section 9-17(1) | A New Tax System (Goods and Services Tax) Act 1999 Section 100-5 | A New Tax System (Goods and Services Tax) Act 1999 Section 100-10 | A New Tax System (Goods and Services Tax) Act 1999 Section 100-12 | A New Tax System (Goods and Services Tax) Act 1999 Section 100-15 | A New Tax System (Goods and Services Tax) Act 1999 Section 100-25 | A New Tax System (Goods and Services Tax) Act 1999 Section 195-1

Reasons for decision: Summary: It is the Commissioner's view at paragraphs 57 and 58 of GSTR 2003/5 that section 100-5 of the GST Act only applies when the supply of the voucher would be a taxable supply under the basic rules of the GST Act. One requirement for a supply to be taxable is that it must be made for consideration. For section 100-5 of the GST Act to apply there must be consideration for the supply of the voucher. If there is no consideration for the supply of the voucher section 100-5 of the GST Act does not apply and the basic rules apply. On the facts provided, the A2 voucher falls within the meaning of a 'voucher' for the purposes of section 100-25 of the GST Act. That is the A2 voucher is a voucher or similar article the terms of which entitles the holder to receive a supply in accordance with its terms so that the holder can redeem the voucher for a reasonable choice of goods up to the monetary value stated on the voucher. Supply of voucher The supply of the A2 voucher 'given away' for 'free' is not a taxable supply on which GST is payable under section 9-5 of the GST Act because the supply is not for consideration. At paragraph 58 of GSTR 2003/5, the Commissioner refers to vouchers donated by an entity to a charity or given away, as an unsolicited gift or unsolicited promotional item (non-charity) as examples of vouchers to which section 100-5 of the GST Act does not apply. The supply of A2 vouchers, in the present circumstances, is analogous to the circumstances under which 'Retailers Galore' gives away vouchers for no consideration in examples 9 and 10 of GSTR 2003/5. Where section 100-5 of the GST Act does not apply, the other provisions of Division 100 of the GST Act also do not apply. Accordingly, the supply of the A2 voucher for no consideration is not a taxable supply and as such section 100-5 of the GST Act does not apply. Supply of goods on redemption The redemption of the A2 voucher, not being a voucher to which Division 100 of the GST Act applies, involves the exercise of a right to acquire something. The consideration for the supply of the goods by customers on the exercise of that right is limited to any additional consideration provided (subsection 9-17(1) of the GST Act). Where no additional consideration is paid, there is no consideration for the subsequent supply of goods on redemption of the A2 voucher and therefore the supply of those goods is not a taxable supply. The supplies on redemption of the A2 vouchers are not taxable supplies on which GST is payable unless consideration is given in addition to the voucher. This means that GST is payable only to the extent that consideration is given for goods on redemption of the A2 voucher in addition to the monetary value stated on the voucher and the supply of goods otherwise satisfies the requirements of a taxable supply. On the facts provided the A3 voucher falls within the meaning of a 'voucher' for the purposes of section 100-25 of the GST Act. Example 27 of GSTR 2003/5 and paragraphs 130 to 133 of GSTR 2003/5 describes circumstances where a voucher is supplied on condition that something else, in that case goods, are purchased by a program member. Where the supply of such a voucher is a separately identifiable part of the supply, the purchase price is consideration for all the things supplied, including the voucher. As such, the consideration, in those circumstances, should be apportioned between the supply of the voucher and the supply of something else (in this case goods purchased) as a form of 'mixed supply'. Based on the description of the program arrangement, a program member is supplied with an A3 voucher as a reward for making a certain quantity of GST inclusive eligible purchases. The member can satisfy the eligible purchase requirement either in a single purchase or by accumulating several purchases over time. Paragraphs 130 to 133 and example 27 of GSTR 2003/5 are concerned with the situation where the voucher forms part of a supply that is bargained for (i.e. it is part of the package purchased). This can be distinguished from what you are offering your program members, which is a voucher supplied once a certain quantity of purchases have been made either in a single purchase or by accumulating purchases. Having regard to the Commissioner's views, terms of the program arrangement and inferences to be drawn from all the circumstances surrounding the transaction, the consideration paid by the program customer is properly attributable to the goods purchased (eligible spend) and the supply of the A3 voucher is supplied for no consideration as a reward to the program member. Accordingly, you are not making a 'mixed supply' for consideration when supplying a reward voucher to the program member. Supply of A3 voucher The supply of the A3 voucher is not a taxable supply under section 9-5 of the GST Act because the supply is not for consideration. As the supply of the A3 voucher is not a taxable supply, section 100-5 of the GST Act does not apply and therefore the requirement of Division 100 of the GST Act is not met. Supply of goods on redemption The redemption of the A3 voucher involves the exercise of a right to acquire something. The consideration for the supply of goods by customers on the exercise of that right is limited to any additional consideration provided by the customer (subsection 9-17(1) of the GST Act). Where no additional consideration is paid by the customer, there is no consideration for the supply of the redemption goods. The supplies on redemption of the A3 vouchers are not taxable supplies on which GST is payable unless consideration is given in addition to the voucher. This means, that GST is payable only to the extent that consideration is given for goods on redemption of the A3 voucher in addition to the monetary value stated on the voucher and the supply of goods otherwise satisfy the requirements of a taxable supply. As both the A2 and A3 vouchers are not vouchers to which Division 100 of the GST Act applies to, no increasing adjustment arises under section 100-15 of the GST Act.

Reasons for decision: Section 9-5 of the GST Act provides, amongst other things, that you make a taxable supply if 'you make a supply for consideration'. However, section 9-5 of the GST Act also provides that the supply is not a taxable supply to the extent that it is GST-free or input taxed. In the present case the goods supplied are neither GST-free or input taxed. | The term 'supply' is defined in section 9-10 of the GST Act as 'any form of supply whatsoever' and includes amongst other things, a supply of goods or a creation, grant, or surrender of any right. | 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. | Section 100-5 of the GST Act achieves this by providing that where a voucher falls within the statutory definition of a voucher in section 100-25 of the GST Act, the supply of that voucher will not be a taxable supply where two requirements are satisfied: | • on redemption, the holder of the voucher is entitled to supplies up to a monetary value stated on the voucher (paragraph 100-5(1)(a) of the GST Act), and | • the consideration for the supply of the voucher does not exceed the monetary value (paragraph 100-5(1)(b) of the GST Act). | Subsection 100-25(1) of the GST Act defines a voucher as any voucher, token, stamp, coupon or similar article or a prepaid phone card or facility the redemption of which in accordance with its terms entitles the holder to receive supplies in accordance with those terms. | The Commissioner of Taxation (Commissioner) 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).