International
Transfer of value
A transfer of value describes something of worth passing from one party to another, and for GST it matters because consideration can be money or any other benefit, including goods swapped in a barter.
A transfer of value is a plain-language way of describing the movement of something worth money from one person to another, whether in cash, goods, services or other benefits. It is not a defined term with a single rule in the GST law, but it is a helpful way to understand how GST works, because GST is triggered by supplies made for consideration and consideration can take many forms.
Consideration under the GST law includes money, but also includes anything else given in return for a supply, such as goods, services or even a promise to do something. This is why a barter arrangement, where two businesses swap goods or services with no money changing hands, is still treated as two taxable supplies if both are made in the course of an enterprise and the other conditions are met.
In a barter, each party makes a taxable supply and each makes an acquisition. Each should issue a tax invoice, report GST on the value of what they supply, and, if eligible, claim a credit for the GST on what they receive. The GST-inclusive value of the consideration is usually based on the market value of what is received or given, so valuation is a practical issue that must be documented.
Not every transfer of value is a supply for consideration. A genuine gift, with nothing expected in return, is generally not a taxable supply, though gifts and private transfers can have other tax effects. Transfers between related parties at below market value, or transfers within a business group, can attract special rules and often need close review. Transfers of money alone, such as lending or repaying a loan, are generally financial supplies and are input-taxed rather than taxable.
Common mistakes include forgetting that non-cash arrangements have GST consequences, undervaluing the goods exchanged, and failing to issue invoices because no money moved. Another is assuming that a payment is not consideration because it is described as a fee, a deposit or a contribution. Substance matters more than the label, so read the arrangement carefully.
If you swap goods or services with another business, write down what each side provided, their agreed value and the GST treatment, and keep tax invoices on both sides. Also consider your records for income tax, since barter income is generally assessable. This page is general information only, so confirm your situation with the ATO or a registered tax professional.
Worked example
A registered cafe supplies catering worth $1,100 including GST to a registered printer, and in return the printer supplies menus worth $1,100 including GST. No money changes hands. Each business makes a taxable supply, so each reports GST of $1,100 / 11 = $100 on its sales and can claim $100 as a credit on the purchase, if it holds a valid tax invoice.
Practical tips
- Treat barter as two sales and two purchases. Issue tax invoices both ways, even when no cash moves.
- Record how you valued what was exchanged, because the ATO may ask for evidence of the market value.
- Write down the agreed value in the contract before any swap takes place, so both parties report consistent figures.