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GST Article – Vouchers

This article looks at how GST applies to vouchers, and highlights that not all vouchers are treated the same way under the GST provisions. In particular, it looks at vouchers issued to be redeemed for food and/or drink at events.

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This article is derived from a Q&A received which asked the question: ‘Is GST applicable on Food Vouchers supplied to Staff on Company Events (i.e. Australia Day)?’

As the question did not provide any specifics regarding the features of the food vouchers, nor the transactions taking place, we have set out below a summary of how GST applies to vouchers generally, as well as some comments regarding the potential treatment of the food vouchers based on certain assumptions.

There are special GST rules for vouchers. These are found in Division 100 of the GST law.

The ATO has issued a ruling on GST and vouchers – refer to GSTR 2003/5.

The term ‘voucher’ is defined for GST purposes as:

‘any … voucher, token, stamp, coupon or similar article … the redemption of which in accordance with its terms entitles the holder to receive supplies in accordance with its terms …’.

Paragraph 7 of the Ruling states that a voucher evidences a right or entitlement to receive supplies in the future, and the obligation to make supplies, on the exercise or redemption of that right or entitlement. A voucher plays a part in two transactions – the supply of the voucher itself, and the redemption of the voucher for supplies.

The supply of a voucher will be a taxable supply where the requirements of section 9-5 are met. These conditions are:

  • The supply is made for consideration;
  • The supply is made in the course or furtherance of carrying on an enterprise;
  • The supply is connected with the indirect tax zone (i.e. Australia); and
  • The entity making the supply is registered or required to be registered.

However, a supply is not a taxable supply to the extent it is GST-free or input taxed.

However, where the conditions in Division 100 apply (essentially that the voucher has a monetary value stated on it and can be redeemed for supplies up to the stated monetary value), the supply of the voucher is generally not treated as a taxable supply. While the supply of the voucher may not be a taxable supply, when the voucher is redeemed for the supply of something, that supply is then subject to the normal GST rules.

By way of example, if an individual pays $100 for a voucher (e.g. a store voucher with a face value of $100), this would generally entitle the holder to redeem the voucher in return for goods and/or services up to a value of $100. Where Div. 100 applies, the sale of the voucher is not subject to GST. However, when the voucher is redeemed for, say $100 of clothing, the voucher is treated as consideration for the supply of the clothing. As clothing is generally subject to GST, the supply of the clothing is treated as a taxable supply. If the item being supplied is GST-free e.g. fresh food from a supermarket, the redemption of the voucher would be for a GST-free supply and therefore would not be subject to GST.

Not all vouchers are covered by Division 100 – for example, a voucher that does not have a stated monetary value on it would not be covered.

So, in the context of the question being raised in terms of food vouchers, it will depend on the form of the voucher and any other conditions. If, for example, a voucher is issued that simply states ‘redeemable for one food item’ it would not be covered by Div. 100. The GST treatment will then depend on the specific arrangements in place.

If the employer is acquiring such food vouchers – paying the food suppliers for the vouchers – and then providing them to employees to be redeemed at the particular event, we revert to the general conditions in s. 9-5 to determine whether the supply of that voucher will be a taxable supply. Assuming the supplier of the vouchers is GST-registered, the sale would appear to meet all the conditions to be a taxable supply and would be subject to GST. Provided the employer obtains a tax invoice, they would be able to claim a GST credit.

Having already been subject to GST on the supply of the food voucher, when this type of voucher is redeemed, the supplier would not be subject to GST again unless some further consideration is provided. For example, if the voucher was originally sold for $11 and it entitled the holder to one food item, no further GST would be payable.

By way of further example, if on redemption of the voucher the holder not only obtained their food item but also requested a can of soft drink and paid $3.30, then GST would apply on this further consideration provided (we note that the supply of the drink would in any event be a separate supply to that covered by the voucher).

In summary, not all vouchers are treated the same way for GST. When it comes to vouchers, remember that this is an area where special rules may apply which differ from the normal GST rules, but only where the specific conditions in Div. 100 are met.

Disclaimer: This article is based upon information available as at the time of publishing and may be subject to change.