Tax office ruling - GST on Loyalty points

[ronicat]

The ATO has just made available a ruling on GST implications of Loyalty programs. So far it looks like it is only some providers that will be affected
http://law.ato.gov.au/atolaw/view.htm?DocID=GST/GSTR20121/NAT/ATO/00001&PiT=99991231235958

 

[Moopere]

Good lord. I'll have to sit down with a clear mind for an hour to digest that page of gobbledegook.

Thanks for the link - hard to know what it really means after a quick read. Perhaps most/all loyalty schemes will see fit to base themselves overseas?

 

[Kendall Roy]

Odds of an 'enhancement'?

 

[Pushka]

I'm going to wait for an Accountant to post. That ruling makes me 'ead spin.:shock:

 

[JohnK]

Hornets Nest.

I will wait for someone with a better understanding of the implications....

 

[Awesom Andy]

A quick read of it suggests that, as members of the loyalty program, there are no GST components when we acquire or redeem points. However, for the program partners/operators (e.g. Optus pays the bill to Qantas for QFF points), then GST is payable. I don't know how this is different from what is currently in place, but obviously, partners will pass on the costs to members if there's any losses arising from tax.

 

[Shelf]

A few weeks later, after browsing the Loyalty Plus website, Larry realises that he has enough points for the reward of a monthly bus ticket.

A monthly bus ticket? He must have his CC's working overtime!

 

[Awesom Andy]

A monthly bus ticket? He must have his CC's working overtime!

It's a mistake by the website. It should've read "A few YEARS later..."

 

[cove]

The GST rate on QF points issued by Qantas is about half the 10% rate as about half of the points issued are used for overseas travel. The portion used for overseas use are exempt from GST.

 

[pshepvic]

A quick read of it suggests that, as members of the loyalty program, there are no GST components when we acquire or redeem points. However, for the program partners/operators (e.g. Optus pays the bill to Qantas for QFF points), then GST is payable. I don't know how this is different from what is currently in place, but obviously, partners will pass on the costs to members if there's any losses arising from tax.

In the example though, that should not impact the frequent flyer. Optus pays Qantas the GST. Qantas then pays that GST that has been collected to the government, so is then "neutral" (or offsets it against other GST input tax credits).

Optus claims the GST it has paid Qantas as an input tax credit.

GST paid from one business to another is effectively neutral until the last business along the line pays it to the government. Each company "passes the GST cost on" to the next up the chain, so the first individual who paid GST may not have even been an Optus customer. You could never actually work out where the GST was initially collected - it could have been 20 companies up the line!


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