Special arrangements
Vouchers
Vouchers, such as gift cards, are generally not taxed when sold. GST applies later, when the voucher is redeemed for goods or services that are themselves taxable.
A voucher is a document or card that entitles the holder to goods or services up to a stated value or of a stated kind. Gift cards, restaurant vouchers, prepaid cards for a shop and many promotional vouchers are common examples. GST treats these in a way that differs from ordinary sales, because the buyer is paying now for something that will be supplied later, if at all.
For a standard face-value voucher, the general principle is that the sale of the voucher is not itself a taxable supply. The business that issues it therefore does not charge GST when it sells the voucher, and a buyer who purchases a voucher for business use cannot claim a credit at that point. The tax is dealt with when the voucher is redeemed and the holder actually receives goods or services.
On redemption, the supplier makes a supply of the goods or services to the holder. If those goods or services are taxable, GST applies to the supply, and the voucher serves as payment or part payment. The shop would therefore include GST in the amount reported on the Business Activity Statement for the period when the supply occurs, and the holder would receive a tax invoice where one is needed.
If a voucher is never redeemed, no supply occurs, and generally no GST is payable on the amount received for it. This can be a benefit for businesses with unused vouchers, although state and territory laws may regulate expiry and refunds. Anything the business keeps when a voucher lapses is a commercial matter, and the tax outcome should be checked for the particular type of voucher.
Not all vouchers are the same. A voucher that entitles the holder to a specific item, for example a particular meal or treatment, may be treated differently from a voucher with a dollar value. Discount vouchers that reduce the price of a sale, such as a coupon giving a dollar amount off, are generally treated as a price reduction, not as separate vouchers. Vouchers sold at a discount to face value also raise specific questions about the amount of consideration.
A common mistake is for a business to charge GST when selling a gift card and then again when it is redeemed. Another is failing to track voucher redemptions, so sales are reported in the wrong period. Keep clear records of vouchers issued, redeemed and outstanding, and make sure your point of sale coding for redemptions is set up correctly.
Because the rules vary by voucher type, this page is general information only. Check your situation with the ATO or a registered tax professional.
Worked example
A day spa sells a $220 gift voucher to a customer. No GST is reported on the sale of the voucher. Three months later, the holder redeems it for a massage that is a taxable supply. The $220 payment is treated as consideration for the massage, so GST is $220 divided by 11, which is $20, reported in the BAS for the period in which the massage is supplied.
Practical tips
- Do not charge GST when you sell a standard face-value voucher, and make sure you account for GST at redemption.
- Keep a register of vouchers issued, redeemed and unredeemed so each sale is reported in the right BAS period.
- Treat discount coupons as price reductions, not as vouchers, and check how vouchers sold below face value are handled.