Concepts
Pay-by-phone
Pay-by-phone describes paying for goods or services, such as parking or a bill, by phone call, SMS or app, where GST depends on the underlying supply and any service fee added.
Pay-by-phone is a payment method rather than a type of tax. It covers paying for something using a phone call, text message or mobile app, for example paying for street parking, settling an invoice with a card over the phone, or topping up a service through an app. Because the payment method does not change what is being bought, the starting point for GST is always to ask what the underlying supply is and whether that supply is taxable, GST-free or input-taxed.
If the underlying purchase is a taxable supply, such as a commercial car park or a business service, then the price paid includes GST and the seller is responsible for reporting it. If the underlying purchase is GST-free, such as certain education or basic food, no GST is included just because it was paid by phone. Some government charges are treated differently again, so a business paying a council or other government body for a service should look at the receipt or invoice to see how GST has been shown.
Many pay-by-phone services also add a transaction or convenience fee. That fee is usually a separate supply from the payment provider or the seller, and in many cases it is a taxable supply that includes GST. A fee that is simply a card surcharge passed on to the customer will generally follow the same treatment as the sale it relates to, but a fee charged by a separate payment provider may be dealt with on its own terms. The statement or invoice should show whether GST is included.
For businesses, the key issue is evidence. To claim an input tax credit on a purchase of more than $82.50 including GST you need a tax invoice. A phone or app payment confirmation might not be enough on its own. Parking apps and similar services often send a receipt by email or in the app that can serve as a tax invoice if it contains the required details, but it is worth checking that it states the seller, the amount, the GST and what was supplied. For purchases of $82.50 or less, the rules are lighter, but records should still be kept.
For sellers who accept payments by phone, the same sales rules apply as for any other sale. Each payment forms part of sales on the BAS, and the GST is one-eleventh of the GST-inclusive price for taxable supplies. If you pass on payment processing fees to customers, record how you show them on invoices and apply the same GST treatment consistently. Keep payment records for five years.
A common error is claiming a credit for the whole of an app payment when part of it is a non-business or non-GST item, such as a government charge with no GST. Another is treating a bank card receipt as a tax invoice when it does not identify the supplier or the GST.
Because the rules vary by what is being paid for, this is general information only, and you should confirm your situation with the ATO or a registered tax professional.
Worked example
A registered tradie pays $55 for parking via a phone app plus a $3.30 app fee, a total of $58.30 including GST, for a client visit. Because the total is under $82.50, a full tax invoice is not required, though a record is kept. If GST is included in both items, the credit is $58.30 divided by 11, which is $5.30. Had the council charge carried no GST, only the GST in the fee would be claimed.
Practical tips
- Check each app receipt to see whether GST is shown and whether the supplier details appear, because a bare payment confirmation may not be a tax invoice.
- Keep the digital receipt in your accounting software or a dedicated folder so the BAS credit claim is supported for five years.
- Do not assume that every fee on a payment screen carries GST. Government charges and some services are treated differently.