Private ruling: Calculation of total monetary prizes for global GST amount calculation on gambling supplies
Date of advice: 29 April 2016
Published: June 2016

Ruling: A8: You can use any reasonable basis for apportionment where they are not able to specifically match points issued to members against specific point's redemption reward options chosen by the member. Issue 9 For purposes of paragraph 193 of GSTR 2002/3, in calculating a reasonable basis of apportionment as to the percentage of points redeemed by a member as 'total monetary prizes' (for purposes of section 126-10 of the Act) via money paid by EFT by you to the member's pre-paid card account, you can use information generated from reports produced by the system.

Relevant facts and circumstances: You are amalgamated clubs which operate under a single ABN. Members the club can become a member of the loyalty program where members can earn reward points. Members can earn reward points under this program by the club issuing points. A report can be generated from the System at any time which shows the total points accrued and used by members as follows: • Loyalty Points Assigned - loyalty points issued to members as prizes on the outcome of gambling events conducted at you such as bingo, cash draws and raffles; or • EGM Points Accrued - loyalty points issued to members as a result of participating in the playing of gaming machines at the club; or • POS points Accrued - loyalty points issued to members as a result of spending money at the club on food, beverages and other items. • Points Used - redemption of points issued to members, for example where such redemption may be via EFT to the members pre-paid card account or the use of points to purchase food or beverages at the club. Members can also acquire a pre-paid card that allows them to convert points earned as part of the loyalty program into monetary value (i.e. money) that is loaded onto the pre-paid card via a transfer of money to the account number of the member's card. Each card is issued in the members name and includes the unique account number for that member on the card. The money is loaded onto the pre-paid card via an Electronic Funds Transfer (EFT) paid by you to a members pre-paid account number when a member redeems points which have been accrued by the member under the loyalty program. Redemption of loyalty points can occur via a number reward options chosen by the member. The system report used by the club is able to record the number of points accrued in each reward point category but is unable to differentiate between, the reward options chosen. For example, where a member has a mix of points earned from participating in gambling activities and POS purchases and redeems these points via a mix of reward options, the club is not able to specifically match which points have been redeemed as a transfer of money to the member's pre-paid card account as opposed to points which may be used to purchase food or beverages or promotional items at the club. You consider that in reviewing the information which is generated via the system reports, there is a specific reasonable apportionment methodology which can be proposed for approval by the ATO and this methodology is verifiable via the information produced in the reports. It is further considered that the methodology proposed is supported by the fact that loyalty point's accounts are reset to zero each year. This means that the points issued by you and accrued and used by a member in any calendar year are representative of the activities in respect of which the points have been issued. By way of example, you provided a calculation for a single period. The actual points number calculated and used in a BAS period will be updated from reports run from the system for that BAS period.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 s126-5. | A New Tax System (Goods and Services Tax) Act 1999 s126-10

Reasons for decision: Detailed Reasoning - Detailed reasoning: Under Division 126 of the Act, the GST payable on gambling supplies is dealt with by using a global accounting system that provides for an alternative way of working out the net amount by incorporating the net profits from such gambling supplies. Subsection 126-10(1) defines the global GST amount for a tax period as: (Total amount wagered - Total monetary prizes) x 1/11 where: total amounts wagered is the sum of the consideration for all of your gambling supplies that are attributable to that tax period. total monetary prizes is the sum of: (a) the monetary prizes you are liable to pay, during the tax period, on the outcome of gambling events (whether or not any of those gambling events, or the gambling supplies to which the monetary prizes relate, take place during the tax period); and (b) any amounts of money you are liable to pay, during the tax period, under agreements between you and recipients of your gambling supplies, to repay to them a proportion of their losses relating to those supplies (whether or not the supplies take place during the tax period). A 'monetary prize' is defined by the GST Act to mean: (a) any prize, or part of a prize, in the form of money; or (b) if the prize is given at a casino - any prize, or part of a prize, in the form of money or in the form of gambling chips that may be redeemed for money. The definition of 'money' in section 195-1 of the GST Act includes: (e) Whatever is supplied as payment by way of: (i) […] (ii) crediting or debiting an account; In your private ruling application, you have correctly identified the treatment set out in paragraphs 191-194 of GSTR 2002/3 that loyalty points awarded for winning bets, or for participation, when redeemed for money are able to be included in total monetary prizes. Similarly, you correctly identified that points awarded for the purchase of meals, beverages and other non-gambling services are not awarded on the outcome of a gambling event and can therefore not be included in total monetary prizes even when the points are redeemed for money. When you conduct an electronic funds transfer to enable a member to redeem loyalty points for money, this amounts to payment by way of crediting an account. The requirement in the definition of 'money' in s195-1 of the GST Act is met, despite each member's funds being held in a single account owned by the card issuer. The member is able to access their credited funds once the EFT is complete. Therefore, an electronic funds transfer to a member's pre-paid Card fall within the definition of 'money' in the GST Act and can be included as a 'monetary prize' when calculating your global GST amount. | Detailed Reasoning - Detailed reasoning: Paragraph 193 of GSTR 2002/3 requires that loyalty points rewarded for non-gambling activities must be separated from those points awarded for gambling activities. Without the ability to separately identify these points, a reasonable basis for apportionment can be used. The methodology you have proposed is based on data from your loyalty points reporting system and can be generated for each accounting period. It takes into account the relevant totals for points awarded for gambling activities compared to non-gambling activities. The Commissioner agrees that the proportion of points produced from gambling activities is a reasonable reflection of the redemption of loyalty points into money for the purpose of calculating total monetary prizes.

Issue 1: That for purposes of section 126-10 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) and ruling Goods and Services Tax Ruling GSTR 2002/3 (GSTR 2002/3), you can include amounts in the calculation of total monetary prizes as follows: | a.) Money paid to members pre-paid card accounts on the redemption of loyalty points issued to members as prizes on a gambling event or competition supplied by you can be considered a 'monetary prize' for purposes of calculating 'total monetary prizes' under section 126-10 of the Act. | b.) Money paid to members pre-paid card accounts on the redemption of loyalty points issued on the basis for participation in a gambling event rather than for a win on a gambling event or competition supplied by you can be considered a 'monetary prize' for purposes of calculating 'total monetary prizes' under section 126-10 of the Act. | Answer: Loyalty points redeemed for money that were issued under the circumstances in a.) or b.) can be considered a 'monetary prize' for the purposes of s126-10 | Issue 2: That for purposes of section 126-10 and ruling GSTR 2002/3, you cannot include amounts in the section 126-10 calculation of 'total monetary prizes', the redemption of loyalty points which are issued to members on the purchase of meals, beverages and other non-gambling services and redeemed for money. | Answer: Loyalty points issued on the purchase of meals, beverages and other non-gambling services cannot be included in 'total monetary prizes' even when redeemed for money. | Issue 3: Confirm that an EFT transfer made by you as a way of crediting a members pre-paid card account is 'money' as defined for purposes of section 195-1 of the Act. | Answer: The EFT transfer made by you onto a member's pre-paid card will meet the definition of money in section 195-1 of the GST Act. | Issue 4: Where it is confirmed that an EFT transfer made by you is considered 'money' in ruling request issue 3, then under ruling request issue 1, an EFT transfer made by you as a result of a member redeeming points which are earned as prizes on the outcome of a gambling event or as a reward for participating in a gambling event, is considered a 'monetary prize' as defined for purposes of section 195-1 of the Act. | Answer: An EFT transfer made under the circumstances in Issue 3 is considered a 'monetary prize' for the purposes of section 195-1 of the Act. | Issue 5: Where it is confirmed that an EFT transfer made by you is considered a 'monetary prize' in ruling request issue 4, the amount of the EFT transfer can be included in the calculation of 'total monetary prizes' for purposes of 126-10 of the Act. | Answer: The amount of the EFT transfer referred to in Issue 4 can be included in the calculation of 'total monetary prizes' for purposes of 126-10 of the Act. | Issue 6: On the basis of the principles in ruling request issues 1, 4 and 5, points issued to members and identified in the System reports as Loyalty Points Assigned and Points Accrued and which are redeemed for money can be included in the calculation of 'total monetary prizes' for purposes of section 126-10 and ruling GSTR 2002/3. | Answer: Loyalty points redeemed for money as identified in issues 1, 4 & 5 can be included in the calculation of 'total monetary prizes' for purposes of section 126-10 of the GST Act. | Issue 7: On the basis of the principles in ruling request issue 2, points issued to members and identified in the System reports as POS points Accrued and which are redeemed for money cannot be included in the calculation of 'total monetary prizes' for purposes of section 126-10 and ruling GSTR 2002/3. | Answer: POS points Accrued and which are redeemed for money cannot be included in the calculation of 'total monetary prizes' for purposes of section 126-10. | Issue 8: For purposes of paragraph 193 0f GSTR 2002/3, can you use a reasonable basis of apportionment where they are not able to specifically match points issued to members against specific points redemption reward options chosen by the member which is then recorded in the Points Used account.