The ATO, on Wed 1.8.2012, released Technical Discussion Paper TDP 2012/1 (GST treatment of recovered dishonoured payment costs).
It considers the GST treatment of costs being recouped by a supplier when payment by a customer for a supply is dishonoured, resulting in the supplier incurring dishonoured fees from their financial provider which fees and associated costs are then recovered from their customer.
The ATO said the paper is designed to facilitate consultation as a part of the process of developing a potential ATO view on the application of GST law, and is not a publication that has been approved for taxpayers to rely on.
Broadly, the paper discusses the following:
- ATO’s understanding of the payment processes by way of cheque and direct debit, and the dishonouring of payments;
- the relevant GST provisions and whether recouped dishonoured payment fees are consideration for an “interest” within Div 40 of the GST Regulations (also includes discussion of GST Advice GSTA TPP 065 – Is GST payable on a dishonoured cheque fee?); and
- possible alternative GST treatments of dishonour fees recovered from the customer by the supplier including the provision of stand-alone facilitation services, damages for contractual breaches, and additional consideration for underlying supplies.
COMMENTS due by 29 August 2012
[LTN 147, 1/8]