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GST Case on Promotional Discounts

Following a Full Federal Court decision that did not go the Tax Office’s  way, it has issued a ‘draft ruling’ explaining its new stance in relation to sales of products which contain discounts in some shape or form.

In this case, the taxpayer was a manufacturer and distributor of luxury spectacles, frames and sunglasses.  As part of its marketing strategy, it discounted the frames, not the lenses, and was able to successfully argue that the sales price of GST exempt lenses could be separated from the GST taxable frames.

The Full Federal Court said that:

“Promotions that offer lower prices or greater value subject to conditions are common practice in many, if not every, arena of retail sale.”

“The offer may be “two for the price of one”, or “buy one, get one free”, or, as here, a reduction in the price of the frame on condition that the lenses are purchased at the same time.”

“How a promotion is structured is a matter for the commercial judgment of the seller. In the present case, it has clearly been decided that the discount offered should be applied to the price of the frames rather than the lenses.”

Living Away From Home Allowance

A recent case that came before the Administrative Appeals Tribunal involves a claim that was made against an allowance that was described on a truck driver’s payment summary as a LAFHA or living-away-from-home allowance.

The taxpayer’s return treated the amount received as a ‘reasonable travel allowance’ which, if it were, any deductions would not require substantiation.

It turns out it was neither a LAFHA nor a travel allowance but was merely a loading which had been negotiated between the employee and the union.

As such, any claim for travel expenses required full substantiation.  The taxpayer had no receipts or other evidence to prove his claim and his appeal was dismissed.

This case demonstrates how important it is for employers to correctly describe allowances and benefits on payment summaries and for employees to understand exactly what they mean.

ATO Warns us Again About Scams

The Tax Commissioner, Michael D’Ascenzo, has reminded the community to be aware and alert to scams claiming to be from the ATO.

“We are seeing an increase in the number, creativity and sophistication of scams being reported,” Mr D’Ascenzo said.

“Scammers are ramping up their efforts and we are seeing a range of sophisticated scams, including:

  • phone calls that play a legitimate-sounding recorded ‘training and monitoring’ message at the start of the call;
  • phone calls from people posing as ‘tax officers’ that provide fraudulent ATO call-back details;
  • emails about ‘the recipient’s tax refund, special deals and donations’ that are made to appear to have come from the ATO and use ‘ATO or government’ in the email address; and
  • emails containing a dangerous virus, which when opened or downloaded will crash the recipient’s computer.

“You can forward suspect email scams to ReportEmailFraud@ato.gov.au or call us during business hours on 1800 060 062 to discuss a suspected scam.

“Anyone can be the victim of a scam. If something seems suspicious, too good to be true, asks you for personal details or cannot be verified by contacting an official source, it is likely to be a scam and you should report it.”

 

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