This Determination (not previously released in draft form and issued Wed 27.2.2013, states that the payment of a failed payment fee is not consideration for a supply in circumstances “when a payment for a supply fails”. However, the Determination states this will only occur where a range of conditions are satisfied, including the following:
- there is an attempt to make a payment for the underlying supply by way of the supplier presenting a cheque or the supplier attempting a direct debit on the recipient’s bank account in accordance with the authority it has from the recipient;
- the attempted payment is dishonoured or declined and the supplier’s financial institution imposes an “inward dishonour fee” on the supplier;
- the supplier and recipient have agreed or would be taken to have agreed that in utilising direct debit or cheque payment methods the recipient will have available funds to make the payment of the initial consideration amount for the underlying supply; and
- there is nothing in the agreement between supplier and recipient that describes the failed payment fee as part of the consideration for anything supplied by the supplier.
However, the Determination also states that the characterisation of a payment for GST purposes is dependent upon the facts in each case and that as a result, it may be possible for the payment of a failed payment fee to have a sufficient nexus with the underlying supply for the failed payment fee to form part of the consideration for that supply.
DATE OF EFFECT: This Determination applies both before and after its date of issue.
WITHDRAWAL: Note also that Goods and Services Tax Advice (GSTA) Tax Practitioner Partnership (TPP) 065, which described a failed payment fee as consideration for an input taxed financial supply, is withdrawn with effect from today [ie Wed 27.2.2013].
[LTN 39, 27/2/13]
Withdrawal: GST Advice GSTA TPP 065: Is GST payable on a dishonoured cheque fee?
Following the issue of GST Determination GSTD 2013/1 (When a payment for a supply fails, is a failed payment fee charged by the supplier consideration for a supply?), GST Advice GSTA TPP 065 has been withdrawn with effect from Wed 27.2.2013. The Advice dealt with situations where a dishonoured cheque fee is on-charged by a supplier to its customer, and is considered to be not correct to the extent it suggests that an on-charged dishonoured cheque fee is consideration for an input taxed financial supply. However, note that GSTD 2013/1 states that a taxpayer can choose to apply the GST treatment stated in the Determination to past transactions despite having previously relied on GSTA TPP 065 if their circumstances are consistent with those described in this Determination, but any entitlement to a refund would involve consideration of relevant time limits and the restriction on refunds of overpaid GST, including potential reimbursement of unregistered recipients.
[LTN 39, 27/2/13]