What are the requirements to be able to claim GST credits on a credit card surcharge that is not shown on the tax invoice? This typically arises when making payments to suppliers using credit card via their on-line portal.
The ATO’s view on credit card surcharges is set out in GSTR 2014/2.
Generally, a surcharge is treated as part of the consideration for the underlying supply and, if that transaction is a taxable supply, GST will apply to the surcharge component as well.
However, GSTR 2014/2 is silent regarding tax invoices. Therefore, consideration needs to be given to how these rules may apply to the supply.
In the context of the above query, assume the original tax invoice for the supply has been issued for the ‘normal price’, for example, $110 (including GST of $10). As part of the payment process a credit card surcharge of 2% is applied meaning an additional amount of $2.20 (including $0.20 GST) is payable. Ideally, if the surcharge occurs at the same time as the acquisition, then you could request an updated tax invoice for the total amount ($112.20 including $10.20 GST).
However, we note that as the surcharge changes the consideration of the underlying taxable supply, the payment of the surcharge would also be treated as an ‘adjustment event’. As such the supplier could issue an adjustment note (instead of issuing an updated tax invoice) which would appear to be sufficient to claim the GST component of the surcharge as a credit.
Whether you are requesting a tax invoice or an adjustment note the supplier generally has 28 days from the date of request to provide it.
From a practical viewpoint, and on the basis the surcharge relates to an underlying taxable supply and is considered an adjustment event, where the amount of the surcharge is below $75 then it appears there is no requirement for the supplier to provide a tax invoice/adjustment note as the amount is below the nominated threshold (see s 29-80(2) of the GST Act and GST regulation 29-80.02).
We further note that paragraph 16 of GSTR 2013/2 states that where ‘the amount of the decreasing adjustment does not exceed $75 (or such higher amount as the GST Regulations may specify)’ this is one of the circumstances in which an adjustment note is not required to be held. Therefore, as no adjustment note is required for the surcharge component the original invoice is sufficient evidence of the amount charged and the transaction to which it relates and should be sufficient to claim the GST component of the surcharge without holding a tax invoice/adjustment note. Following on from the example above, the original tax invoice showing $110 could be used to support the total GST credit claim of $10.20 relating to both the underlying taxable supply and the credit card surcharge. We recommend retaining sufficient evidence which indicates the credit card surcharge applied (e.g. a receipt, or statement showing the total amount paid, or any documentation which indicates the surcharge will be applied if payment is made by credit card.)
Where a surcharge is $75 or more you will not be able to rely solely on the original invoice to claim the GST credit on the surcharge. In many cases the supplier will typically issue a combined tax invoice/receipt upon payment which includes the updated total price and GST. However, where this does not occur you may be able to rely on the original invoice in conjunction with a receipt or other document issued by the supplier (see s 29-70(1A)) to claim the GST credits on the surcharge. To be able to rely on the two documents to claim a GST credit, all of the requirements of a tax invoice must be ascertainable from the combined documents (refer to the ATO website). In this case, the information missing from the original invoice would be the total price and GST, may be shown on the receipt issued to you. We note that the other documents used in conjunction with the original invoice must be issued by the supplier, therefore a credit card statement may not be sufficient.
Unfortunately, where the other documents provided to you by the supplier do not contain the necessary additional information you will need to request an updated invoice or an adjustment note.