Yesterday the Commissioner published GSTD 2013/1 ‘Goods and services tax: when a payment for a supply fails, is a failed payment fee charged by the supplier consideration for a supply?’ and GSTR 2013/D1 ‘Goods and services tax: adjustment notes’

GSTD 2013/1

In the Determination the Commissioner considers that a failed payment fee (eg, a fee payable by a customer to an internet service provider paying by direct debit if there are insufficient funds in the customer’s account) is not consideration for either a financial supply or another supply (eg, a supply of administrative services). This is a different outcome to the previous published view of the Commissioner in Goods and Services Tax Advice (GSTA) Tax Practitioner Partnership (TPP) 065 which described the failed payment fee as consideration for an input taxed supply – that advice has been withdrawn.

The basis for the Commissioner’s view is that there is insufficient connection between a failed payment fee and anything supplied by the supplier. Whilst a failed payment may result in the supplier having to undertake additional actions, these are not services that are supplied to the recipient – they are simply a necessary part of the supplier ensuring it receives payments for amounts owed.

Further, the Commissioner does not consider that an “interest” in a financial supply is provided or created – this is because the supplier has not received any property in a debt or a new debt from the customer. The original debt never ceased to exist and remained the property of the supplier.

GSTR 2013/D1

The draft ruling sets out the requirements for adjustment notes under Division 29 of the GST Act, including:

• when a document is in the approved form for an adjustment note
• the information requirements that the Commissioner has determined under paragraph 29-75(1)(c) and an explanation of how those requirements in the A New Tax System (Goods and Services Tax) Adjustment Note Information Requirements Determination 2012 apply
• when the Commissioner will treat a particular document as an adjustment note even though that document does not meet all of the adjustment note requirements under subsection 29-75(1)
• an appendix summarising the circumstances when a decreasing adjustment can be attributed without an adjustment note as determined by the Commissioner under s 29-20(3)