Private ruling: Non-monetary consideration
Date of advice: 5 February 2026
Published: 30 March 2026
Ruling period: From the date of issue until the tax period ending 31 January 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: For the purposes of section 9-15 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), is the byproduct you retain non-monetary consideration for your taxable supply of toll processing services? | A1: No.

Relevant facts and circumstances: You are registered for goods and services tax (GST). Your enterprise includes the supply of toll processing services to third-party customers (such as primary producers). Toll processing involves the slaughter, boning, packaging and sale of livestock on behalf of the customer. You charge various categories of fees to customers in connection with the provision of toll processing services. (Collectively these are termed the "Processing Fees" under the "Toll Processing Agreement"). Toll processing services you supply give rise to taxable supplies subject to GST. Under your Toll Processing Agreement, customers retain all meat derived from the processing services other than "byproduct" (i.e. edible offal and inedible byproduct (mixed abattoir material ("MAM")) which you retain. It is neither commercially viable nor practical for customers to retain byproduct derived from the slaughter of livestock. This is because byproduct, in its raw state, must be subjected to further processing and packaging in order to be suitable for sale. You have invested in the necessary infrastructure to commercialise byproduct. Customers can "buy-back" byproduct; however, this is only after you perform further processing. The byproduct bought back is not the same as the raw unprocessed byproduct derived from the slaughter of livestock. You and your customers do not enter into formal written commercial agreements in relation to toll processing services. A prospective customer would connect with your sales team and negotiate the Production Fee payable for toll processing services. This would largely be driven by the number of livestock to be processed. Once agreed, the parties would document the arrangement over email. You supplied a copy of a specimen email agreement. This is representative of the way in which you agree to provide customers toll processing services. The email agreement sets out the Processing Fees (or production fees in the email) referred to above. It sets out production capacities, available dates. Included within that section of the email is a single line setting out this term: "offal, hides, inedible material to remain property of ZZZ". There is no fee assigned to the retention of byproduct. The email agreement also notes that the customer has the option to "buy-back" byproduct (or offal items) at agreed market rates. The byproduct referred to as part of the buy-back is byproduct that has been subjected to further processing by you. It is not the same as the raw unprocessed byproduct initially retained by you from the slaughter process. You included a sample tax invoice for toll processing services. This tax invoice is representative of tax invoices for toll processing services. The tax invoice lists the various fees and charges included in the Toll processing. There is no allowance for byproduct within the detail of the tax invoice. You provided further information as follows: • Edible offal includes product items such as liver, heart, lips, tails, head meat, throat trimming, tripe pieces, tripe, tongue, thin skirt, thick skirt, mountain chain, tendons and omasum. • The term 'edible offal' is defined in meat industry standards as offal that is suitable and approved for human consumption. This includes organs and parts as identified above, provided they meet hygiene and government regulatory inspection requirements. Edible offal is distinct from inedible offal, which includes parts not approved for human consumption which is used in pet food or utilised in your rendering facility. • You and the customer do not assign any value to the byproduct as part of the negotiation for the Processing Fee. Moreover, the byproduct does not reduce or otherwise adjust the amount of the Processing Fees.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 , section 9-10 | A New Tax System (Goods and Services Tax) Act 1999 , section 9-15 | A New Tax System (Goods and Services Tax) Act 1999 , section 9-75 | A New Tax System (Goods and Services Tax) Act 1999 , section 195-1

Reasons for decision: Summary: In determining whether byproduct you retain is non-monetary consideration for your taxable supply of toll processing services, we need to consider the statutory framework and Commissioner's advice in Goods and Services Tax Ruling GSTR 2001/6 Goods and services tax: non-monetary consideration (GSTR 2001/6). There must be a supply for or in connection with the consideration. Supply and consideration are defined broadly. 'Supply' is defined in subsection 9-10(1) as any form of supply whatsoever. 'Consideration' is defined in section 195-1 to mean 'any consideration, within the meaning given by section 9-15 and 9-17, in connection with the supply'. Subsection 9-15(1) provides that consideration includes: (a) any payment, or any act or forbearance, in connection with a supply of anything; and (b) any payment, or any act or forbearance, in response to or for the inducement of a supply of anything. Subsection 9-15(2) provides that it does not matter whether the payment, act or forbearance was voluntary, or whether it was undertaken by the recipient of the supply. The amount of GST on the taxable supply of the processing is 10% of the value of the taxable supply, per section 9-70. 'Price' is defined in section 195-1: in relation to a supply, has the meaning given by sections 9-75... Under section 9-75, the value of the taxable supply is price x 10/11 where the price is the sum of (a) so far as the *consideration for the supply is consideration expressed as an amount of *money--the amount (without any discount for the amount of GST (if any) payable on the supply); and (b) so far as the consideration is not consideration expressed as an amount of money--the *GST inclusive market value of that consideration. Therefore, the price for the toll processing services is the GST inclusive: • monetary consideration paid by the customer and • any identifiable non-monetary consideration at its market value at a time it can be reasonably be valued. GSTR 2001/6 provides the Commissioner's view of what constitutes non-monetary consideration for the purposes of section 9-15: 64. A supply is not subject to GST in Australia unless it is made for consideration. Consideration 'for a supply or acquisition' is defined in section 195-1 as any consideration, within the meaning given by sections 9-15 and 9-17, that is 'in connection with the supply or acquisition'. The definition of 'consideration' in section 195-1 operates to ensure consideration can include 'acts or forbearances'. It follows that any 'act or forbearance' must be in sufficient connection with the supply. There is identifiable monetary consideration for your services but whether you are receiving an additional non-monetary consideration for your services is a question which can only be answered by properly examining the arrangement 'looking at all of the transactions entered into and the circumstances in which the transactions are made': paragraph 71 of GSTR 2001/6. Additionally, the consideration must have an independent identity and economic value to be treated as payment for a supply (paragraph 80 of GSTR 2001/6). Paragraph 81 elaborates that the non-monetary consideration must be capable of being valued and be a thing that that an acquirer would usually pay money to acquire. This principle is known as its 'economic value'. If the supply is not for something of economic value, it is not consideration in any form. Contracts are exchanges of rights and obligations. Often the true nature of a transaction may characterise the payment as a condition of the contract rather than the provision of non-monetary consideration (paragraph 83 of GSTR 2001/6). Another key point in the framework for making the assessment of non-monetary consideration are circumstances where the obligation identifies the supply. Paragraph 86 of GSTR 2001/6 states: 86. Particular terms that form part of a transaction need to go beyond merely defining or describing the supply, or specifying rights that are to be retained by the entity making the supply, before the terms form a separate supply or additional consideration for a supply under the transaction. This principle also applies in overseas jurisdictions. | Detailed Reasoning - Application of the above principles to you:: To ascertain whether the retention of the rights to the byproduct under the agreement are non-monetary consideration, we need to ascertain these elements: 1. the recipient has supplied you a thing i.e., the byproduct; 2. the recipient provided that byproduct for your services; and 3. the byproduct is capable of being valued for a sum greater than zero. If any of these elements are missing, there is no non-monetary consideration. Prima facie, due to the width of the definition of supply set out above, there is a supply of the byproduct to you, which is retained via a clause in the sample email at Appendix D referred to in the facts. Additionally, the byproduct is provided under the toll services agreement which gives it some temporal proximity. However, as discussed below, the byproduct is not for the provision of the toll processing services. Even if this is incorrect, we consider the value of the byproduct is zero at the relevant time. Given that the value of the byproduct changes once processed, the issue of when the market value of non-monetary consideration is established is important. GSTR 2001/6, paragraphs 159 to 165, states the legislation does not fix a time when any potential non-monetary consideration is valued. The time of valuation must be reasonable in the circumstances of the transaction. At paragraph 160, the ruling suggests it may be: • when parties enter into a binding agreement; • when economic risk is transferred; or • when a recipient assumes effective control. In this particular case, it appears reasonable in the context of the arrangement to value the non-monetary consideration at the time the parties enter into the agreement. The processing agreement sets out a fee for a service of providing all of the things under the processing or production fee which amount to the dressing and sale of the meat on the customers' behalf. There is no attributable value for the byproduct set out in either the processing fee and the tax invoice provided. This goes some way to indicating that, as between the customer and you, the purpose of entering into the agreement is the meat processing and sale. As a part of assessing the true character of the supply, your receipt of the byproduct must be sufficiently in connection with the identified supply of processing services. While the byproduct passes under the same agreement for the processing services, it is not, of itself, evidence of a sufficient connection. In practice, the byproduct has no value to the recipient of the toll processing services because they cannot use it as they have no means to process the byproduct. In effect, this means that, at the time the agreement is entered into and up to the date of slaughter, the byproduct is of no value to either party. It is only after the byproduct is processed, that it has any value to you. You made an additional point in your submission that the byproduct is contemplated by the customer as waste product. That is, it 'alleviates the need for the customer from otherwise having to deal in the byproduct'. This characterisation fits best within our analysis of the transaction. As stated above, to be non-monetary consideration, the payment must have economic identity and value. In the context of the transaction, there is no economic value at the time the transaction is made. The time of transacting in this case is when the email agreement is entered into. At that point, the animal has not been slaughtered, making any assessment of the byproduct impossible. If it has a value, it is negligible. In our view, the position does not change even if the customer later buys back the byproduct because, at that point, the byproduct has been altered and does have value. In summary, the arrangement is best characterised in the context of industry process and the respective positions of you and the customer at the time the transaction is made. It is clear the byproduct will have value at a later time when processed. Due to the characterisation of the agreement, at the relevant time, the byproduct does not have an economic value. As a result, the supply of the byproduct to you is not additional consideration.